How have solar equipment costs declined over time?

Over the last decade, the costs of solar have decreased from over $8 per watt in 2009 ($/W) to $2.75/W in 2019 on EnergySage, a decline of more than 65 percent in 11 years. Over this timeframe, a primary driver of the declining cost of solar in the US has been technological improvements in the actual hardware that's included in solar energy systems: solar panels and solar inverters.

The process of making solar panels follows a few distinct steps. Polysilicon–effectively very high-quality, fine sand–is converted into ingots, which are like gold bricks. These ingots are flattened or cut to produce wafers: very thin, square slices of silicon which form the basis of solar cells. Electrical busbars–which capture the flow of electrons in the silicon–are added to the wafers to convert them into solar cells, which are then aggregated together and mounted into a solar panel.

Given this process, there are two key ways in which the cost of solar panels can decrease: either the silicon used to create the cells drops in cost, or the manufacturing of each component can become more efficient, leading to cost declines.

According to the National Renewable Energy Laboratory (NREL), between 1980 and 2010, the cost of solar panels decreased from $10/W to around $2/W, a decline of 80 percent over 30 years. This pace of price decreases has slowed in recent years; however, the cost of solar panels dropped an additional 70 percent from 2015 through 2020, from about $0.7/W to $0.2/W.

As a result, currently, solar panels account for about 15 percent of the cost of a solar panel system.

Solar inverters make up the other primary component of the cost of solar equipment, at around $0.21/W, or 8 percent of the total installed cost of solar. However, although solar inverter costs have similarly decreased by about 50 percent since 2013, the cost declines have largely begun to stagnate in recent years. Although manufacturers are outputting more and more inverters each year, producing each individual inverter more efficiently and cost-effectively, they are also now much higher voltage and more technologically advanced.

When you purchase a solar panel system, you are paying for more than just the solar equipment–the hardware–that you'll actually be putting on your property. For instance, you'll pay for the actual labor to install the solar panels on your home, as well as any local permitting and utility interconnection fees and, finally, sales and marketing costs. Together, these non-hardware costs are commonly referred to as "soft costs."

Taken as a whole, soft costs provide the final frontier for potential reductions in the cost of solar in the future. In fact, a recent NREL report suggested that soft cost reductions could account for two-thirds of future cost decreases for solar, as seen in the figure below.

Another way of interpreting these findings is that there are now fewer opportunities for reducing the cost of solar equipment – the technology and manufacturing processes have matured and reached a point where they're already quite efficient. As a result, solar costs will decrease in the future as a result of increasing efficiencies in installation processes, reductions in permitting and interconnection times and fees, or less spending on sales and marketing.

One other way to save on solar is to go solar with EnergySage. When you register for a free account with EnergySage, we collect and aggregate custom solar quotes from solar companies near you. By providing transparency and head-to-head competition, EnergySage can reduce the cost you pay for solar by 15 to 20 percent. Sign up today to see how much EnergySage can save for you on solar.