The economics of solar energy make sense today. The main stumbling block is financing the initial purchase (for homeowners, businesses or utilities). For new power generation solar is economically competitive in many locations today and prices continue to decline. One aspect that has harmed financing is the historical depreciation has been high (assuming a short lifespan of solar panels) but the panels now have much longer lifespans, meaning that when computing the return of solar investments you can expect a longer payback period. Combine that with falling prices and the economic case is great.
For a homeowner there is still the problem of financing what could be a $30,000 installation. Of course, the extremely low interest rates help here. First you have low cost capital (when calculating your return). Second, your alternative yields are very low (so it isn’t like you would earn 8% on your money just buying a CD). But for those that don’t want to take on the loan many companies are being formed to work on the financing for you (they deal with financing and then sell you the electricity they generate with panels on your home). It is a good business model I think. I personally think you are better off cutting out the intermediary and financing it yourself, but if you don’t want to, you can get cheaper electricity and help the environment.
In the USA there is a 30% federal tax credit for solar installation. Several states also offer tax credits for solar installation. There are also incentives in many other countries including Japan, Germany, Spain, Italy…
Where the U.S. Solar Industry Is Shining
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Developers in the U.S. added 449.2 megawatts of solar-generating capacity in the third quarter of 2011, the latest data available, up 140 percent from the same quarter a year earlier.
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SunRun hires local companies in 10 states to install solar arrays on customers’ roofs. The company charges clients for the electricity they generate— at monthly rates as much as 15 percent below those of regular utilities. Jurich says she expects SunRun to have a presence in 15 to 20 states within five years.
I own JinkoSolar stock which manufactures solar panels. This is based on the belief that solar has reached a point where it is a good way to generate electricity and we have huge needs for electrical power generation world wide.
Related: Top Countries For Renewable Energy Capacity – Global Wind Energy Capacity Exceeds 2.5% of Global Electricity Needs – Solar Energy: Economics, Government and Technology – Oil Consumption by Country 1990-2009
Solar is not so cheap today that is makes economic sense to turn off current generating capacity (where the capital has already been invested in some greenhouse gas producing facility). However for new capacity in many locations it makes sense today. And new capacity is needed. Battery technology is not good enough today for a completely solar and wind electrical generation system to make sense. Storage of generated electricity is the biggest stumbling block now to even more compelling case for solar and wind. Storage will be addressed with engineering innovation, most likely. Solar and wind electrical generation should increase dramatically in the next 5, 10 and 20 years.
The credits provided currently are not even needed to make the financial decision to invest in solar a wise decision: the dramatic technical improvements and cost reductions are the key reasons investing in solar energy makes sense today. The other thing the credits do is make financing more readily available (which really is mainly an issue due to lifespan estimates for solar power generation being far to low in the calculations – according to recent studies). The credit just make it even wiser to do so.
Solar power much cheaper to produce than most analysts realize, study finds
Additionally, Dr. Pearce says that research now shows that the productivity of top-of-the-line solar panels only drops between 0.1 and 0.2 percent annually, rather than the much higher 1 percent drop used in many cost analyses.