US Residential Solar Pricing Needs a Major Overhaul Now

Over the past decade the price of residential solar has dropped 64% due in large part to falling hardware costs. What would have cost over £30,000 for a standard 10-kilowatt system in the early 2010s is now around £20,000. That’s a significant decrease, but not nearly enough to make full-scale solar a reasonable option for most people in the United States, where the median household income is £67,521.

Energy costs are soaring and the most recent IPCC report warns of extreme consequences if we don’t act now to mitigate the effects of climate change. “The scientific evidence is unequivocal: climate change is a threat to human wellbeing and the health of the planet.

Any further delay in concerted global action will miss a brief and rapidly closing window to secure a livable future,” IPCC co-chair Hans-Otto Portner said. It can feel pretty daunting to figure out what steps to take today. Investing in renewable energies like solar is one way to significantly reduce your carbon footprint at the individual level — and an increasing number of alternative solar services and products are hitting the residential market.

Those new technologies offer more choices if you can’t install a full-scale solar system or want to supplement an existing residential system. But none of them come close to replicating what you can potentially save long-term in money and energy with a whole-home system. Yet. We need something else, an alternative to the current residential solar model in the US that promises similar carbon reduction levels while also costing much less money.

And we need it now.

Solar pricing outlook

The biggest solar cost reductions occurred in the first half of the decade and had already slowed considerably before the pandemic hit. Halfway through 2021, solar panel prices in the US increased for the first time in seven years due largely to supply chain delays. Notably, last year still broke records for solar installations as customers took advantage of the solar Investment Tax Credit, but 2021’s price increases are expected to hurt installations this year.

“The supply chain constraints of the last year will hit 2022 installations the hardest, reducing capacity by 7% compared to 2021,” said Michelle Davis, principal analyst and lead author of Wood Mackenzie’s 2021 Solar Insights report.

These pandemic-related price increases aren’t slated to hurt solar growth estimates long-term, but they certainly don’t help the underlying problem that’s preventing solar from spreading in the US more quickly today: solar systems cost way too much. Last year, the US reached 121.4 gigawatts of solar capacity, equivalent to powering 23.3 million homes. Even with 2021’s addition of a record-breaking 23.6 GW, only 4.2 GW was for residential installations.

Around 5% of American homes currently have solar, according to Wood Mackenzie.

Despite the higher prices in solar this year, 2022 is still expected to see growth in solar installations, partly because of the solar Investment Tax Credit. The ITC will remain at 26% through 2022 before dropping to 22% next year and phasing out for residential solar in 2024. At that current level, with the ITC remaining as-is, Wood Mackenzie predicts average yearly solar growth of 6% in the US through 2032.

If the ITC is extended under the Build Back Better plan, solar installations will double to 12% annual growth, including 20% residential growth by 2032. Even at those levels, it’s unlikely we’ll hit the 2035 carbon-free power goal outlined by the Biden administration. “The biggest factor of what will affect global climate by the end of the century is what people do,” said Michael Grose, a research scientist at CSIRO, the Australian national science agency and lead author of the IPCC’s Sixth Assessment Report. “Because we can’t predict what people will do and what pathway our emissions will be on, we fundamentally have to take a scenario approach [to predict global emissions in the future].”

Alternatives on the horizon

With the future of solar pricing in flux, people will have to get creative today to reduce their carbon emissions. Fortunately, plenty of brands are offering interesting alternatives to traditional solar systems. If you can’t afford or otherwise can’t install solar panels where you live, there’s community solar, renewable energy certificates and utility solar programs in some cities.

Some solar providers also allow you to rent panels rather than buying them outright. There are many ways to reduce your footprint without solar panels, too, from offsetting your travel with carbon credits to turning off the lights when you leave a room. Small changes can make a big difference, but these options likely won’t give you the same level of potential money and energy savings you could get with a full-scale solar system.

So, where does that leave us?

I’ve been thinking a lot about how the solar industry in the US overlaps with where the home security industry was years ago. For a long time, we had ADT, Vivint and other security service providers — and assorted one-off alternatives. An intrepid early adopter could probably have cobbled together some standalone alternatives to create their own DIY security system.

But most people were left with either a pricey service (albeit nothing like the price of a solar system) or something that wasn’t designed for whole-home security. Then competitors started to appear, most notably the DIY security system SimpliSafe, with similar products and services as the traditional home security service providers at a lower price. This shifted the home security market in a significant way.

It introduced new, similarly affordable competitors to SimpliSafe and left some traditional security companies behind (or, in some cases, encouraged them to offer their own DIY options). This is what we need for solar. Emerging options like the GAF Energy Timberline Solar are promising.

These streamlined solar panels can be installed by a regular roofing company because the process mimics installing an asphalt roof. Because of that comparative simplicity, they’re also supposed to cost much less money. This product doesn’t address the barrier to entry for renters or folks who otherwise can’t install solar where they live, but it’s a start.

And we need more of it, now.