Wednesday, February 22, 2006

Slate says its the "wrong time" to push for solar . . . I disagree

Hello solarDwellers:

Check out today's article at Slate magazine, which basically says that since there's a shortage of silicon for solar panels right now, the author would have wished to put all solar-based federal tax credits and state rebate programs on hold for two years, and all consumer purchases of solar panels on hold, for that matter, until silicon panel prices come down by 20%.
From the article:
"[In two years more silicon factory production will come on line and], following the law of supply and demand, the price of the material should fall. Solar panels will probably be at least 20 percent cheaper in two years, according to Scott Sklar, president of the Stella Group, a solar consulting firm."

First off, how does this "Slate" advice affect YOU if you want to install solar??? You might pay a little less for solar if you wait for two years, but you might also pay MORE. It's hard to predict.

The Positive scenario if you wait two years:
Today's before-rebate price for a 3-kilowatt(DC) system is $27,000 and after rebates and tax credits your net price is $16,600. If solar panel prices decrease by 20% in two years, it will only decrease your total system cost by 10%, because the panels themselves only make up 50% of the total cost to have a solar-electric system installed. So, the installed price before rebates would be ($27,000 x .90) or $24,300, and your net price after rebates and would be $15,100 instead of the current price of $16,600, a savings of $1,500. (Note: the savings is less than you might have expected, because the CA rebate that gives you money back for solar purchases will ALSO go DOWN by 7%, from $2.80 to $2.40/watt over two years; scenario also assumes that the $2,000 fed tax credit will get renewed for 2008).

The Negative scenario in waiting two years:
First, let's say silicon panels only come down 10% in price over the next two years, for a total system savings of 5%. So, the installed price before rebates would be ($27,000 x .95) or $25,650, and your net price after rebates would be $16,450 instead of the current price of $16,600,a savings of only $150. BUT, (and this is an essential "but")the two-year delay to install those solar panels will "cost" you as well. Instead of those two years of waiting, if you had gone ahead and bought those panels, they would have given you 2-years' worth of electricity bill savings of about $1255. So, technically, you must add the "opportunity cost" of having lost out on $1255 of savings since you waited two years: ($16,450 + $1,255) or a real "negative scenario" cost of $17,705, which is more more than the current price of $16,600. But that's still before the biggest risk of waiting: if the $2,000 solar fed-tax credit expires at the end of 2007, like the wind tax credit did last year, you're looking at a price of ($17,705 + 2,000) or $19,705 instead of today's $16,600!!

The point is, regardless of price fluctuations, you have to factor in the BENEFIT of the two-years' $1,255 of energy bill savings if you install "today", and those savings help to mitigate the "risk" of buying now, while solar-silicon prices potentially edge down during the next two years.

To avoid getting too long here, now that I've talked about the risks along with the possible benefit of waiting to install solar, my next post will talk about why it's bad policy to "delay" state and federal solar tax benefit and rebate programs.

My message: if you want to go solar, there's no "big" benefit and very real risk in putting it off two years. If you're motivated, take advantage of today's rebate and tax benefits and start SAVING on energy bills TODAY!!

--the solarDweller
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