About This Article
Global solar prices are better than they have ever been.
Production costs are down, efficiency is up, and consumers and businesses across the world are beginning to use solar energy as a mainstream source of reliable power. But as solar becomes an increasingly viable alternative to fossil fuels, the need to subsidize this renewable energy source is fading.
The result?
Many incentives (like the Residential Renewable Tax Credit, here in Oregon) are being rolled back.
Believe it or not, this is the best news the solar industry could receive!
Here's Why:
Production costs are down, efficiency is up, and consumers and businesses across the world are beginning to use solar energy as a mainstream source of reliable power. But as solar becomes an increasingly viable alternative to fossil fuels, the need to subsidize this renewable energy source is fading.
The result?
Many incentives (like the Residential Renewable Tax Credit, here in Oregon) are being rolled back.
Believe it or not, this is the best news the solar industry could receive!
Here's Why:
Brand New, In-Depth Information for 2018:
WHY ARE SOLAR INCENTIVES ENDING IN 2018?
Solar Is a Staggering Success Story
It is important to start with the obvious: Solar works. And it often works in places you might not expect.
Take rainy Western Oregon for example.
Here in Portland, our long summer days and progressive net-metering laws make solar energy extremely effective as a power source. A solar installation can significantly reduce power bills and solar panels are expected to last well beyond their warranty period of 30 years. The first solar panel ever created is still working, in fact.
This success is not limited to the technical side of things, either.
In financial terms, a dollar invested in a solar installation back in 2014 was predicted to beat the S&P 500's, 25-year projected return in 46 of America's largest 50 cities, when financed at 5% for 25 years (this is according to a 2015 study from the North Carolina Clean Energy Technology Center - more on this in a bit).
Portland, Oregon was specifically named as one of the cities in which this was true, by the way.
In 2017, things were even better financially than they were in 2014. ...In fact, they were better, by far!
Take rainy Western Oregon for example.
Here in Portland, our long summer days and progressive net-metering laws make solar energy extremely effective as a power source. A solar installation can significantly reduce power bills and solar panels are expected to last well beyond their warranty period of 30 years. The first solar panel ever created is still working, in fact.
This success is not limited to the technical side of things, either.
In financial terms, a dollar invested in a solar installation back in 2014 was predicted to beat the S&P 500's, 25-year projected return in 46 of America's largest 50 cities, when financed at 5% for 25 years (this is according to a 2015 study from the North Carolina Clean Energy Technology Center - more on this in a bit).
Portland, Oregon was specifically named as one of the cities in which this was true, by the way.
In 2017, things were even better financially than they were in 2014. ...In fact, they were better, by far!
It Was Not Always This Way
Once upon a time, solar energy couldn't compete with the cheap electricity generated from the burning of fossil fuels, like coal.
Today, solar costs have fallen so far that you might be shocked to learn the truth about them:
Today, solar costs have fallen so far that you might be shocked to learn the truth about them:
However, back in 1980, for example, 1 Watt of solar panels cost around $16 to install. This price was extremely high compared to the cheap, plentiful electricity that the fossil fuel and hydroelectric infrastructure was churning out at the time.
Solar needed a helping hand.
Solar needed a helping hand.
Solar Subsidies Enter the Picture
In the 1970s, Congress began looking for ways to make solar more affordable. In 1978, they passed the Energy Tax Act that created one of the first and most powerful solar subsidies in American History: the Investment Energy Credit (or ITC - see note 19 at this link). There was a residential version and a commercial version.
For the first time, the federal government began giving tax credits to people and businesses that invested in solar energy. This allowed solar to gain a foothold in the market, though there was strong opposition.
The road was rocky for the Residential ITC, and program ended in 1985. The commercial version of the credit, however, fared better. It became permanent in 1992 (at a reduced rate).
Over time, additional incentives and tax credits were offered by various entities and state governments to help give solar a boost. At the same time, pressure from citizens began to force "net metering" laws throughout the states.
These new net metering laws required utilities to pay solar power producers for electricity! At the same rate they charged. Solar technology prices fell throughout this period, at times very quickly.
In 2005, the Bush Administration revived the residential version of the federal tax credit, and both were boosted further in 2009. The combined effect of these subsidies, falling prices and global adoption catapulted solar panel production forward. This in turn further dropped prices.
For the first time, the federal government began giving tax credits to people and businesses that invested in solar energy. This allowed solar to gain a foothold in the market, though there was strong opposition.
The road was rocky for the Residential ITC, and program ended in 1985. The commercial version of the credit, however, fared better. It became permanent in 1992 (at a reduced rate).
Over time, additional incentives and tax credits were offered by various entities and state governments to help give solar a boost. At the same time, pressure from citizens began to force "net metering" laws throughout the states.
These new net metering laws required utilities to pay solar power producers for electricity! At the same rate they charged. Solar technology prices fell throughout this period, at times very quickly.
In 2005, the Bush Administration revived the residential version of the federal tax credit, and both were boosted further in 2009. The combined effect of these subsidies, falling prices and global adoption catapulted solar panel production forward. This in turn further dropped prices.
Solar Incentives Can End, Because Solar Does Not Need Them Anymore
Solar subsidies were a smashing success.
Through artificial incentives, tax credits, and net-metering laws, solar energy adoption has been steadily increasing. This has allowed the market to mature and prices to decrease dramatically.
As a result, solar does not need as many subsidies anymore - because it can now begin to compete 1-on-1 with other forms of electricity! This makes the end of incentives like the Renewable Energy Tax Credit (or RETC) here in Oregon great news.
It is great news because it means solar is going mainstream.
Believe it or not, solar is no longer a wishful, futuristic power source of the future; ...it is a reliable, mainstream option for today.
Learn More: Energy Titans Like Coal... Could Solar End Their Reign?
Through artificial incentives, tax credits, and net-metering laws, solar energy adoption has been steadily increasing. This has allowed the market to mature and prices to decrease dramatically.
As a result, solar does not need as many subsidies anymore - because it can now begin to compete 1-on-1 with other forms of electricity! This makes the end of incentives like the Renewable Energy Tax Credit (or RETC) here in Oregon great news.
It is great news because it means solar is going mainstream.
Believe it or not, solar is no longer a wishful, futuristic power source of the future; ...it is a reliable, mainstream option for today.
Learn More: Energy Titans Like Coal... Could Solar End Their Reign?
Solar as an Investment in 2018
Still, the sudden loss of a $6,000 tax credit must change things significantly, right? Is solar still "worth it" here in the new year?
Absolutely.
Yes, losing $6,000 in tax credits changes the ROI as compared to 2017. But solar was beating the stock market back in 2014. So let’s start there first.
Absolutely.
Yes, losing $6,000 in tax credits changes the ROI as compared to 2017. But solar was beating the stock market back in 2014. So let’s start there first.
Outrageous Prices in 2014
Remember that solar energy study using data from 2014? The one that demonstrated solar can beat the stock market?
Well, by today's standards, the cost of solar in 2014 was shockingly high.
The NC Clean Energy Tech Study states (on page 12) that the average installed cost of a 5 kW solar array on a residential home was $19,603 (here in the Northwest of the United States).
Times have changed!
That same 5 kW system in 2017 would only have cost you between $14,000 and $15,750 (Using Q1 2017 aggregated data from the National Renewable Energy Laboratories, by the way. Please Contact us to get a price for your own home!).
This means, last year (in early 2017), you could have saved between $3,800 and $5,600 in equipment costs.
On price alone.
Here in 2018, prices have continued to come down. However, the rate of decrease has begun to level off over time.
Well, by today's standards, the cost of solar in 2014 was shockingly high.
The NC Clean Energy Tech Study states (on page 12) that the average installed cost of a 5 kW solar array on a residential home was $19,603 (here in the Northwest of the United States).
Times have changed!
That same 5 kW system in 2017 would only have cost you between $14,000 and $15,750 (Using Q1 2017 aggregated data from the National Renewable Energy Laboratories, by the way. Please Contact us to get a price for your own home!).
This means, last year (in early 2017), you could have saved between $3,800 and $5,600 in equipment costs.
On price alone.
Here in 2018, prices have continued to come down. However, the rate of decrease has begun to level off over time.
Comparing the Solar Investment Outlooks
Mathematically speaking, homeowners that go solar in 2018 lose $6,000 in tax credits, but potentially gain up to $5,600 in equipment savings. It's nearly a wash.
That is incredible news for solar here in Oregon. And it means those solar subsidies did their job nicely.
It is time for them to end.
That is incredible news for solar here in Oregon. And it means those solar subsidies did their job nicely.
It is time for them to end.
...But Wait. Things Are Even Better.
For Oregonians that use either Pacific Power or Portland General Electric as their electrical provider, things are even better.
Much better.
You see, the Energy Trust of Oregon offers a solar cash incentive to help bring down the cost of solar even further.
The NC Clean Energy Study did not include this incentive in their calculations (see the data table on page 4 of the Appendix)!
That means you could qualify for an additional cash payment to make the investment perform even better.
Plus, in response to the loss of the tax credit, Energy Trust nearly doubled the cash incentive they are offering for 2018!
Much better.
You see, the Energy Trust of Oregon offers a solar cash incentive to help bring down the cost of solar even further.
The NC Clean Energy Study did not include this incentive in their calculations (see the data table on page 4 of the Appendix)!
That means you could qualify for an additional cash payment to make the investment perform even better.
Plus, in response to the loss of the tax credit, Energy Trust nearly doubled the cash incentive they are offering for 2018!
How Do I Learn More About the Solar Cash Incentive Rates?
We wrote an extensive article on how the Solar Cash Incentive works and how to qualify:
Investment Safety vs. Performance
When we speak of an investment return, we have to pay strong attention to investment's volatility, not just its performance. Volatility is a measure of how unstable an investment is.
The stock market is a volatile place to put your money. It can change rapidly and returns are not guaranteed.
How is an investment in a solar installation for your home different?
Well, for one thing, solar is an investment in a tangible asset, as opposed to a prediction of future performance (like the stock market). That means you are buying a real piece of electrical equipment.
This equipment is a piece of property that has a tangible value (and could potentially be used or sold for other purposes). Unless the sun stops shining, or utility rates suddenly drop to free, it is difficult for us to imagine a safer place to invest!
In addition, as utility rates increase, solar becomes more valuable. And because it is predicted to last well beyond its warranty period of 30 years, that value also protects you against future rate hikes. For a very long time.
The stock market is a volatile place to put your money. It can change rapidly and returns are not guaranteed.
How is an investment in a solar installation for your home different?
Well, for one thing, solar is an investment in a tangible asset, as opposed to a prediction of future performance (like the stock market). That means you are buying a real piece of electrical equipment.
This equipment is a piece of property that has a tangible value (and could potentially be used or sold for other purposes). Unless the sun stops shining, or utility rates suddenly drop to free, it is difficult for us to imagine a safer place to invest!
In addition, as utility rates increase, solar becomes more valuable. And because it is predicted to last well beyond its warranty period of 30 years, that value also protects you against future rate hikes. For a very long time.
Investment Comparison: 2014 Solar vs. 2018 Solar
An investment in solar energy was predicted to perform better than the stock market in 2014. Without the cash incentive from Energy Trust.
In addition, the dramatic drop in the price of solar equipment has made the Oregon State Tax Credit unnecessary.
The drop in price is about the same as the amount of the credit. It is nearly a wash.
So, here are is the comparison:
In addition, the dramatic drop in the price of solar equipment has made the Oregon State Tax Credit unnecessary.
The drop in price is about the same as the amount of the credit. It is nearly a wash.
So, here are is the comparison:
- If you qualify for the Solar Cash Incentive: hands down, Oregon solar in 2018 is a far better deal than it was in 2014.
- If you do not qualify for the cash incentive – the investment potential is about the same as it used to be. Which is still better than the S&P 500 (and safer too!).
Investment Comparison: 2017 Solar vs. 2018 Solar
We outline the impact of dropping the Solar Tax Credit and doubling the Energy Trust Incentive in our article: The 2018 Solar Cash Incentive: How Does It Work in Oregon?
Take a look and let us know what you think!
Take a look and let us know what you think!
The Final Word
Financial gurus like Warren Buffet have publicly praised the merits of long-term investing in the S&P 500.
To think that solar power may in fact lead to greater financial security for homeowners here in Portland is an incredible testament to solar's long term value. And a testament to how far things have come for solar in a very short period of time.
Solar energy truly is a bright investment for 2018… and beyond!
To think that solar power may in fact lead to greater financial security for homeowners here in Portland is an incredible testament to solar's long term value. And a testament to how far things have come for solar in a very short period of time.
Solar energy truly is a bright investment for 2018… and beyond!
