You cannot do without electricity in this day and age. You will require it to heat or cool your home. It’s also useful for refrigeration purposes, operating your home appliances, working from home, and many other uses. In 2019, the energy used across the US was 13 times greater compared to 1950. Even as the demand increases, electricity costs keep rising.
It’s worth noting that as electricity prices go up annually, solar power prices have been reducing. Since 2010, the cost of solar has declined by about 82%, as reported by IRENA. We are going to look at the rising electricity costs vs. solar power costs. Let us get started.
Electricity Costs Rising
Electricity prices are dynamic. These prices are a reflection of the building costs, maintenance, and operational costs of power plants. Generally, various factors affect the price of electricity. These are:
Any increase in fuel prices, mostly natural gas or petroleum, adds to the cost. Cases of fuel constraints or when supply is disrupted due to extreme weather conditions can also increase fuel prices. Any damage to the delivery infrastructure of fuel can also affect prices. An increase in fuel costs directly lead to rising electricity costs.
2. Power Plan Costs and Distribution
All power plants have financial demands. The finances aid in construction, maintenance, and handling operating costs. Naturally, these prices are passed on to the consumer.
In the same way, transmitting and distributing electricity to the consumer comes at a cost. The system needs to be constructed and kept running. Such charges can lead to utility bill increase.
3. The Weather
Did you know the cost of electricity is higher during summer? The reason for this change is the addition of more expensive electricity generation to meet the increasing demand. In hot weather, there is a loss of water resources as they dry, affecting hydro-power production. When it snows or rains, these resources are readily available, which can lower the costs.
4. Prices Depend on Type of Customers
Residential and commercial customers pay a higher price compared to industrial and transportation clients. The higher costs for distributing to such customers is the main reason for this. Industrial clients often demand a lot of electricity, which they use at a high voltage. Supplying to such clients is easier and much more efficient.
Currently, the industrial price is at 10.60¢ per kilowatt-hour (kWh). Residential costs are at 13.04¢ per kWh and commercial at 10.66¢ per kWh.
Your location can also determine the cost of electricity. Availability of power plants, fuels, local fuel costs, pricing, and regulation, also influences the amount you will pay. For example, prices in Hawaii are about 28.33¢ per kWh, and in Louisiana, they are at 7.65¢ per kWh.
Cost of Solar Panels Over Time
Since solar energy innovation, the price and availability have fallen gradually, if not dramatically. Over a decade ago, the cost of solar was at $8.50 per watt. Now, the solar cost has been reduced to $2.91/watt. The decrease is a clear indication of the solar energy price direction.
Ten years ago, if you wanted to install solar panels, you would have paid around $51,000 for a standard 6 kW system. Now, that system can cost approximately $17,880. When you add the tax breaks, that cost reduces considerably. Experts advise the price will continue to go down by about 40% in the next five years. So, what is driving the costs down?
1. Research and Development
Public and private sectors have formed vast research projects into solar energy. Such input dramatically impacts the cost of solar as its innovation reduces costs. Research conducted into solar cell technology between 1980 to 2001 increased solar panels’ efficiency. For this reason, they were able to produce more electricity with fewer solar units.
The advancements also affected the manufacturing of solar power units. The new techniques allowed them to make more units with less difficulty and less time. The input from governments and private companies brought about crucial changes. With the latest technology, solar power costs have reduced by 99% from 1980 to 2012.
2. Raw Material Costs
A reduction in raw material costs supports the significant milestones achieved through research and development. For example, diamond wire straws reduce the waste of materials when making the silicon wafer. This has reduced the cost of production.
The non-silicon materials used to manufacture solar products have also experienced a drop in prices. Companies have also increased production efficiency by automating some processes. They have also employed other measures aiming to reduce the cost in the process. These changes have been instrumental in reducing the cost of solar panels and other products.
3. Increase in the Market Size
As it is with most products, there is an increase in demand, over time, the costs reduce. As more and more people adopt solar energy, many producers get the incentive to join the production.
The market growth has led to sizeable investment in huge factories to continue the production of solar products. Here, more units are produced at a lower cost. As lower-priced electricity becomes available, more people join the solar energy market. This leads to more profit, leading to reduced prices.
According to Swanson’s law, every time the global solar capacity doubles, the modules’ price decreases by about 20%.
Solar is aptly termed as the energy of the future. As you can see, the electricity prices continue to increase, affecting your utility bills annually. However, with solar energy, the opposite is true. Solar costs have been at an all-time low, and they are expected to keep reducing as technology advances. The cherry on top is switching to solar helps reduce the solar costs for other customers in the future, even as you address the ever-present problem of climate change.
If your wallet is taking a toll from the weight of utility bills, it is time to go solar. The cost of electricity keeps on rising without any signs of decline. Install solar panels today and enjoy energy at no cost after paying the initial installation cost. At Dynamic SLR, we can help you through the process from the beginning to the end at affordable prices and you get quality products.