California residential solar power headed toward $1/W and 2.5¢/kWh

Solar panels on a Southern California home. State law requires at least 50 percent of California’s electricity to come from noncarbon-producing sources by 2030.CreditDavid Paul Morris/Bloomberg

PV Magazine; May 14, 2018; John Weaver

Due to the state’s revolutionary 2019 Building Energy Code requiring solar power to be installed at time of construction for all newly built homes, over time California home buyers could see per unit prices drop to rates approaching that of some of the world’s largest utility scale solar installations ($1/W in the United States). And if this seems hyperbolic, first let’s lay out the case for why this move by California is about to revolutionize residential solar in our country.

Outside of energy-nerd circles (used here endearingly of course), the dramatic and continuous fall in the price of solar panels is beginning to be acknowledged by the general public. Known as “Swanson’s Law” (a cousin of sorts to the more famous “Moore’s Law”), since the mid 1970s solar panels have gone down about 20% in price every time the volume we ship annually doubles. Put more simply, solar panels are at least three times cheaper than they were just a decade ago. While remarkable, and with every indication that this astounding trend will continue (some data shows the decline speeding up), that’s still just the panels.

What’s different here in the Golden State can be described in just two words: soft costs. For rooftop solar, some of these soft costs include permitting, financing, installation labor, cost of customer acquisition, paying suppliers, … and then of course hopefully some profit is left over for the company if they want to stay in business. Because these soft costs are greater for smaller installations, the U.S. Department of Energy (DOE) estimates soft costs can be almost two thirds of total costs.

Furthermore, soft costs aren’t decreasing as fast as hardware costs. However, this move by California is likely to bring down soft costs sharply, as it is expected to put downward pressure on nearly every one of these soft cost categories. For newly built homes, in many cases it eliminates them altogether.

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