Homeowners thinking about solar power will often ask us if they should wait for the latest and greatest solar technology. The answer is No. And here’s why:
The financial value of the technological improvements in Photovoltaic (PV) technology is outweighed by the cost of waiting. In other words, the additional money you might save if you install more efficient panels is significantly less than the money you save immediately by installing solar today. And if you wait too long, you end up losing money rather than saving additional dollars. Let’s look at some numbers to crystallize this point, but first let’s get a little history.
PV technology is very mature. It has been around for a long time. Jimmy Carter put PV panels on the White House in 1979. While today’s panels are slightly more efficient, there are no major breakthroughs on the horizon.
We are trying to develop new approaches to converting sunlight into electricity, like thin-film and solar concentrators (does anyone remember Solyndra?), but none show any near term promise for homeowners. PV is the most cost-effective and reliable solution for residential and will be for the foreseeable future.
Other, new technologies, like solar shingles may seem enticing. They are attractive and can be installed by regular roofing contractors. Yet, solar shingles have many drawbacks to consider. They require many more holes in the roof to connect electrical wires. And they are also extremely expensive! The whole roof must be replaced and only certain roofs are angled properly for the shingles to be effective. Solar shingles are a nice story but are not yet commercially viable.
Let’s Look at the Numbers
Now let’s take a look at a real world example of how waiting to install solar impacts your wallet. Panel efficiencies right now are typically between 12% and 19%. Going from 16% efficiency to 18% will increase productivity by 12.5%. Sounds impressive, but what does that really mean in terms of economics?
Let’s assume an average rooftop solar system size of 5kW here in the Northeast producing about 5,800 kWh per year. A typical Solar Lease product should save you about 2 cents per kWh on your electricity compared to your current utility rate. Multiply 2 cents times the 5,800 kWh of solar power and you save $116 in your first year. Not bad for simply choosing to go solar with no upfront cost.
Now let’s assume that you wait a year to get panels that are 18% efficient compared to 16%. You will end up producing an additional 725 kWh per year and saving an additional $14.50 for a total of $130.50 in first year savings. But now you’ve given up a year of saving $116 annually to get an additional $14.50. You’ve just given up more than $100.
And the great thing about a solar lease is that you lock in your electric rates from solar, but if you wait to install and the solar cost is higher you simply have to lock in at a higher cost. So let’s see what that means.
Let’s assume that next year your utility rate goes up by 1 cent and the current solar lease offers still save you 2 cents/kWh. With the higher efficiency panels you’ll save $130.50 in your first year, as detailed above.
Here’s the kicker: With the lower efficiency panels you’ll get less production, but you’ll actually save more money ($174 compared to $130.50) because you locked in the year before when utility rates were lower. Now you’re paying 3 cents less than your utility rate and that has a much bigger impact than getting a little more production from your panels. And every year for the next 20 years you’ll save more money by installing today with a lower cost solar lease than you will by waiting for more efficient panels.
“Now hold on,” you might say, “isn’t the cost of solar going down?” The answer again is No. We’ll talk more about this in a later post, but the preview is that federal and state incentives are set to make solar cost comparable to utility prices. As utility rates go up, incentives will decline and be phased out. If you think utility prices are going up (as most people do), then you think solar prices are going up as well.
And if you are concerned about climate change, you know that time is of the essence. We need to act quickly to stabilize and prevent the worst effect of global warming.
The bottom line is: don’t wait for technology to improve. It isn’t improving soon in any meaningful way and you’re giving up the opportunity to save money today and lock in below today’s utility price rather than getting stuck closer to tomorrow’s higher utility price.