by Geoff Greenfield, CEO
Are Solar Prices Going Up or Down?
As discussions about inflation become commonplace, many people are asking us if the price of going solar will be affected as well.
If prices ARE going up, this would certainly be a reversal of historic trends. Many that follow the industry have gotten used to a general expectation of falling prices.
Solar installers around the country have celebrated the significant price drops that accompanied widespread adoption and increased efficiency of the technology. According to the Office of Energy Efficiency and Renewable Energy, “Since 2014, the average cost of solar PV panels has dropped nearly 70%.”
Due to various factors, this trend has reversed, and solar costs are rising for the first time in recent memory.
What is Behind the Inflation in Solar Prices?
Several factors are driving this new upward cost curve.
You’re surely aware of the rising commodity prices and surging freight costs across the country. These factors have impacted everything from vehicles to kitchen ovens. Like all markets in the U.S., the solar industry is beginning to see the effects of inflation as we turn the corner into the new year.
The building blocks of a solar system include copper, aluminum, steel, and electrical components. Copper is needed for solar inverters and electric cabling. Aluminum and steel make up the solar panel racking and panel frames. As the global economy comes back from Covid-19, and economies are “stimulated” with low interest rates, demand is booming while supplies are struggling to keep up.
The economists predict that these materials will continue to rise in price in 2022 and perhaps beyond.
The other major ingredient in a solar system is the people needed to do everything from the engineering work to bolting the modules to the rooftops. Just as the wait at your favorite restaurant is longer due to staffing shortages, the solar industry has their help wanted signs up as they seek to hire and train the workforce needed to meet the growing demand for clean energy.
Wages are rising to attract quality team members and compete with the other booming sectors of the economy. Across the board, positions are harder to fill.
What Does This Mean for People Planning to Go Solar?
Many solar installers have begun raising their prices, and others are planning to as they sell older inventory and are faced with buying more expensive material.
Facing a more competitive labor pool, installers are raising prices to keep up with higher payrolls.
These cost increases have driven up prices. Solar panel prices have jumped 16%, and total prices have risen 12%, according to a press release by Rastad Energy. The forecast is for more of the same throughout 2022.
Could it Get Worse?
While the modest inflation impacting solar is undoubtedly a change in direction from steadily declining prices, several variables could make this inflation more dramatic.
In a significant development in the global marketplace, U.S. Customs and Border Protection (CBP) is beginning to enforce “Withhold Release Orders” on imported solar modules containing silicon from China’s Shaanxi Provence over concerns about the use of forced labor.
While many solar modules are made from material from other regions, systems to track and prove this do not yet exist, and industry experts are worried that even “ethical” solar module shipments may be held at the border.
Another area that could further raise prices is the efforts of several manufacturers to increase tariffs on imported modules – not just from China but from a host of Asian nations.
Finally, while we have discussed costs, rising demand is the other market signal leading to higher prices. The recently passed infrastructure bill is predicted to further drive up commodity and construction labor prices. The pending “Build Back Better” bill promises to incentivize further solar development, driving up demand in an already hot market.
What Can We Do?
As prices increase due to all these factors, deciding when or if to go solar is more important than ever.
One of the important variables is “the cost of waiting”: each month of buying costly dirty utility power is a month that could be filled with the savings of clean energy. We predict that despite the slight rise in costs, the demand for solar will continue to rise, and the limited schedule for established quality solar installers will fill quickly, especially as hiring to meet growing demand is a challenge.
If you have an older solar quote, it is possible that the current rise in prices is partially or completely offset by the historic reduction in costs that the industry has benefitted from over the past several years.
Even if your costs are going up, securing your space in the install schedule is likely to pay off as deferred savings are a lost opportunity.
Our guidance for you: gather updated information, evaluate your own personal situation, and make the right decision for you.