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As the last U.S. Federal tax subsidies dry up at the end of 2016, the question exists as to how solar power will continue to remain affordable. Even as the last tax incentives expire, the costs for solar installation continue to drop steadily. There are several reasons for this, but mostly, it’s the wider adoption of this technology, competition and increases in production of solar panels and equipment that’s responsible for the 40-60 percent decrease we’ve seen year over year. Check out the overview below to help understand the forecast for solar costs as well as a few tips for getting quotes for your own home.
Solar: Cost Per Watt
The unit measure for solar power (meaning, the metric used to quote solar equipment and installation costs) is a watt. Much like you pay for most produce and meat by the pound at the market, a solar integrator or installer prices your installed solar system by the cost per watt. This cost includes panels, racking, inverters, and labor. At the beginning of 2012, when solar subsidies on the local level and federal level were still flush, customers were paying anywhere from $7-8 per watt. In late 2015, the average cost of installed solar is less than $4 per watt, and that price is dropping steadily.
Where is the Cost of Solar Going?
In a word: down. A leading analyst at Deutsche Bank predicts this rapid price decline will continue well into 2017, when we could see prices fall beneath $2/watt. This is not just due to a decline in the cost of solar panels, which have continued to decrease year over year. The cost of inverters, the device that converts the direct current power the panels create into alternating current electricity you use in your home, has fallen 10-15 percent every year.
Things You Should Know about the Cost of Solar Power
If the time has come for you to install your own solar energy system, there are some basic steps to follow to make sure you’re getting good value from a reputable and reliable company.
1. “What is the Cost Per Watt for This System?”
Don’t be shy about asking what the installed cost per watt is. The price of the individual components doesn’t matter; what matters is the overall cost per watt for the entire system. This should be a fast and easy question for your rep to answer. If he or she can’t, it’s time to show them the door and ask politely that they not return until they have an answer.
2. Get at Least Three Quotes
Our recommendation is that you get a quote from a large, reputable solar company (like Solar City) and then two smaller or local solar installers. You should see consistent pricing across all three. Of course, if one is significantly higher, it may be a good idea to reach out to a fourth. Don’t worry. There are plenty of companies out there that will compete for your business.
3. Ask Each Rep for TWO quotes: Purchase and Lease
Each of your three presentations should include two quotes: one for a lease and one for purchase. The cost per installed watt for your lease or your purchase should be the same. When you’re making the appointment, ensure that the rep will have both proposals in hand when they come to your home. If the company can’t provide you with a lease, it’s advisable to talk to a different provider. They may not install at high enough volumes to qualify as a partner for a leasing company (like SunRun), and you want to make sure you’re dealing with a company that installs solar consistently.
You can even book estimates for outdoor electrical projects like solar installation via Amazon Home Services.
Buying vs. Leasing
With prices falling, it’s more and more affordable to buy solar panels and all the associated equipment outright rather than signing on for a 20-year lease. The advantage of a lease, of course, is that you pay nothing upfront. There is typically a step up in payments every year built into the contract, but depending upon where you live, this nominal increase may still be less overall than utility cost inflation. One disadvantage of lease financing is that the solar panels stay on the house when you sell it. The new buyer will have to enter into a relationship with the leasing company and agree to take over the remainder of the lease or you or the buyer will have to agree to pay off the balance. Solar City created an integration team that specializes in transferring ownership of solar leases to new homeowners. However, if you have any plans on selling your home in the next 5-10 years, owning the system outright will give a purchaser the advantage of solar without the hassle of a lease transfer arrangement, which may turn some buyers away.