Residential solar pricing down 6.3%, hints of greater drops coming

EnergySage has released its thirteenth Solar Marketplace Intel Report, in which the company shows that customers were quoted 27% lower prices in the first half of 2021 (H1‘21) versus 2014, and that residential solar pricing is down 6.3% since July of 2020.

This acceleration – starting in July 2020, and ending before July of this year – is compared to the slower price decreases Energysage saw starting in the first half of 2017, and ending with the first half of 2020.

The data shows a broad distribution of pricing, though, and a single national price average doesn’t do it justice. While the median price quoted was $2.67 per watt, greater than 25% of all quotes were $2.25/watt. The long tail of pricing going upward beyond $4.00/watt balanced out the heavy volumes of quotes below the national average.

That fact that so much capacity is being quoted below $2.25/watt is probably worthy of research, so we can better understand the pricing possibilities of the US residential solar market.

Oddly, the nation’s most expensive state, Colorado, at $3.15/watt, is a neighbor of the cheapest state, Arizona, at $2.25/watt.

Notably, while the price has fallen by 6.3% since last year, the average payback time for a similarly sized 10.2 kWdc project has actually increased – from 8.5 to 8.8 years.

A few hypotheses on what’s behind the increased average payback time:

1. States with fewer incentives have been installing more
2. Incentives are falling overall
3. Installations on less productive rooftops have become more feasible due to lower prices
4. An increase in quick finance tools, which cost a bit more than cash/bank loan purchases
5. A desire for energy resilience versus pure savings or environmentalism

Energy storage pricing is mixed, and on average it went up across the nation. However, in key markets like Florida, California, and Texas, pricing is down. Furthermore, we’re seeing Enphase take an increasingly larger share of the home storage market, passing by Tesla to become the number one supplier.

Interestingly, Enphase is tied with Sonnen as the most expensive home battery product tracked, at roughly 50% more than Tesla’s Powerwall. Enphase’s product success probably has something to do with the increase in energy storage pricing overall.

This nuance in pricing is also potentially indicative of why people are buying batteries: for a backup power source. The second most important reason is to save cash on their electricity bill.

We shouldn’t be surprised that a large number of people have been buying storage for resilience purposes. Generac, a new entrant to the solar+storage industry, has sold billions in home generators, which saved consumers nothing on their electricity bills. A generator’s payback is measured in units of comfort: air-conditioning, lights, and frozen foods.

While Energysage has found that customers have always had an interest in energy storage, there is a strong variance in this interest based on geographic location. Many of the states seeking storage are in the central region of the nation, and in places without policies as supportive of solar. Regions that have suffered recent power grid failures have shown a strong energy storage preference as well.

Energysage says that its data shows clear shifts toward greater demand for energy storage, which remained persistent throughout the past five months, following the Texas power grid failure in February of this year.

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