Solar energy has been around for a while, but it has only been in the last few years as technology has improved that it has become a viable option for majority of consumers. Globally, we are seeing more innovation within the solar industry, which, in combination with decreasing costs, has shifted the renewable source further into the mainstream energy market.
On an episode of Planet Money on NPR entitled, ‘How Solar Got Cheap’, hosts Jacob Goldstein and David Kestenbaum interview guest John O’Hagan about his experience with solar energy and discussing his motivations behind choosing the renewable power source being not because it is eco-friendly, but because it was cheap.
Solar energy becoming the cheapest form of power
In essence, the episode indicated that originally, solar energy was only sold to those ‘rich hippie types’ and was seen as something that was just too futuristic and unattainable for everyday people to own. Goldstein was quick to point out that as it stands, such misconceptions are changing at a rapid rate as an increasing number of people turn to solar energy around the world.
O’Hagan reiterated that his two storey, four bedroom house is completely run on solar. He isn’t an overly wealthy person and he isn’t getting solar in order to save the planet. O’Hagan is the consumer revolution that solar energy has been waiting for, as the real reason he’s invested in the renewable source is because it’s easy on he’s pocket. He isn’t overly interested in climate change or even philosophical about eco-friendly lifestyles, he just wants to save as much money as possible.
It was a progression that allowed solar energy costs to reduce to a point of affordability, meaning it didn’t just happen in one fell swoop. As Kestenbaum puts it, this progression can be attributed to three pivotal turning points. Those being, manufacturering has become significantly more affordable, the installation process has become cheaper and solar leasing options have come into play.
Solar energy boom attributed to 3 major industry turning points
SolarCity, the largest installation company in the U.S, are the ones who originally installed O’Hagan’s solar energy system. Just a mere eight years ago, an installation similar to O’Hagan’s would have cost just over $1,000. In today’s market, the same set up would cost around $200-$250. Yes, you read right. In that short amount of time, the costs have been quartered.
A large part of the reason for such a drastic reduction in solar energy costs is due to China’s expansion into panel manufacturing. With the help of government subsidized loans, China was able to construct factories to cater to the growing global demand for solar panels. These solar energy factories all came into the market around 2009, and as a result, the prices began to decline.
As with any market competition, existing solar companies had no choice but to lower their prices, forcing some to actually go bankrupt.
Declining cost forcing solar companies to price match or close up shop
The other major expense previously seen to be putting people off solar energy were the exorbitant installation fees which would cost almost as much, if not more, than the panels. O’Hagan’s house alone had a six member crew installing his panels, consisting of 4 installers and 2 electricians.
As was the case with the manufacturing process; in a few short years the price of installation has not only become affordable but also faster, due to industry advancements. The process now only taking about a half a day to complete, as opposed to two days when solar was first introduced.
The cost of installation is roughly around $25,000, which is still quite a lot of money as an upfront investment and many don’t feel they can justify the expense, regardless of the saving benefit in the long term.
Solar leasing options counted among the prime catalysts for solar growth
For these lower income consumers, it is important to note that due to innovative financing options, people like O’Hagan can still afford solar energy by engaging into a contract. The program NPR guest O’Hagan signed on for was run by the aforementioned SolarCity, who wear the upfront investment of the solar installation and in return, O’Hagan has agreed to pay a monthly bill to for the next 20 years.
Even if such agreements mean that people like John are paying more in the long run, it is more manageable for him as he doesn’t have to spend that amount of cash all in one upfront payment. What made O’Hagan’s decision that much easier was when he figured out how much he currently is paying for his electricity from the grid and how much less he would pay if he went with solar energy. For him, the renewable energy source reduced his power bill by 40%-50%, meaning he now only pays around $100-$110 a month!
It may sound like the perfect opportunity, but it is best to do your research before signing up to any contract. In order for young companies such as SolarCity to stay afloat, they engaged Wall Street banks to invest large amounts of money into their company, ultimately meaning that these banks own a small portion of said panels on residential homes. This is how SolarCity and the like will receive such flow of payments during the next 20 years.
Government subsidies also acknowledged by NPR as a big motivator
Government subsidies and other incentives are also a huge motivator for consumers. As a huge federal tax subsidy which may be implemented in the U.S. in the not too distant future, people like John are already receiving state-level subsidies as we speak.
Though a minute fraction of power is being generated by solar energy within the U.S, the industry is growing, with one report labelling it the “Energy Revolution”.
Now you know more about why it is solar energy has gained so much attention over the past few years and why an increasing amount of consumers are turning towards the renewable source to power their homes. So what’s your next step? Be smart, stop wasting money and jump on the solar energy bandwagon!