When someone asks about the cost of solar panels, the answer can change depending on the context. Solar panels by themselves have a very low cost, thanks to the economies of scale achieved by leading global suppliers. However, solar modules are only one component of a fully-functioning solar power system, and the other components required add to the total price. Solar power systems are cost-effective, but it is important to know exactly what is being priced – the modules alone or the entire installation?
Solar panels became commercially available in the 1970s, but they were a product for researchers, technology enthusiasts and hobbyists. With a cost exceeding US$100 per watt of capacity, they were not a viable technology for large-scale generation. However, manufacturing innovation and economies of scale have been reducing the price of solar modules over decades, and they now cost less than US$0.30 per watt according to Bloomberg.
As mentioned above, solar panels are just one of many elements in a fully-operational photovoltaic system. Considering the following requirements:
The components described above represent the minimal requirements to have a functional solar power system. However, most installations in homes and businesses are grid-tied, which means they must have an interconnection with the local power grid.
Commercial solar systems can also be equipped with optional components that enhance performance. For example, you can add a monitoring system to track energy output from a mobile application, or a battery array to store electricity to be used after sunset.
The price of a completed solar power system depends on the individual cost of all components listed above, but pricing is also affected by geography and country-specific factors. China has become a global manufacturing hub for photovoltaic technology, producing more solar panels per year than all other countries combined – countries closer to China can import photovoltaic technology with a lower shipping cost.
Geography also influences the cost of photovoltaic systems inside countries. Cities and towns close to major ports where solar panels are shipped tend to have lower equipment costs that remote locations, where photovoltaic technology must be delivered by truck. Compared with most other countries with a large solar market, Australia is very close to China, and this has been a major factor that makes photovoltaic systems affordable.
The cost of solar panels is also influenced by country-specific factors and regulations. USA is an example of this, where there are high import tariffs for solar panels with the goal of protecting local manufacturers. On the other hand, Australia is not a major solar manufacturer, and there are no protection tariffs as a result.
Local incentive programs are another important factor that influences the cost of solar panels. Two common types of incentives are rebates and tax benefits:
The combination of geographic factors and country policies for solar power can change the price of a completed system, even if the comparison is based on products from the same manufacturers.
A 5-kW solar power system in Australia typically costs between AU$5,000 and AU$7,000 when you consider proximity to China, import costs and local incentives. A system of similar size in the USA typically costs around US$15,000 due to the longer shipping distance and higher import tariffs.
Although the cost of solar power systems is important, it is not the only factor that determines their demand in a specific country or region. Local electricity prices are also important, since they determine the economic value of solar generation. Consider places like California and New York, where solar power systems are 2 to 3 times more expensive than in Australia, but demand for them is high because local electricity is expensive.
There are also incentive programs that do not reduce the cost of solar power, but increase the value of its energy output. For example, Australian feed-in tariffs are now very low, but at first they were higher than local kilowatt-hour prices. In these cases, solar generation gives you power bill savings plus performance-based payments!
Solar power prices depend on various factors. Innovation and large-scale manufacturing have made photovoltaic technology very affordable, but consider it must be shipped throughout the world from the main manufacturing hubs. Government also have different policies towards solar power, and prices are affected by legislation and incentives.