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MHT's Efrain Viscarolasaga: Solar installation booms in New England
Steep declines in the cost of solar panels is making the overall cost of installing photovoltaic systems on the rooftops of homes and businesses cheaper, but not all of the price declines are falling to the bottom line.
A combination of increased labor costs and reduced rebates has eaten into the savings, and while panel costs are expected to fall further, solar integrators say now is the time to install before those price declines turn into increases.
“Module price decline is a nice one to have because it’s been so rapid, but module prices are not dropping as fast now,” said Brendan Neagle, chief operating officer for Borrego Solar in Lowell, which installs solar systems on commercial and government buildings. Neagle said the total installation cost in Massachusetts has dropped about 20 percent from a year ago.
While declining costs of solar panels may be a boon to integration firms, which install the panels, electrical components and mounting systems, it challenges panel makers to lower the cost of production to protect profit margins. Evergreen Solar Inc., the Marlborough solar panel maker, said in its second-quarter conference call that while it has been able to reduce its manufacturing cost to around $2.70 per watt from around $3.16 per watt in the first quarter, average selling prices declined just as fast.
“This market does not have the elasticity the most markets tend to have. So, people are dropping prices to move inventory not because of increasing demand. Until credit starts to flow, we don’t believe there is much more we can do,” said Terry Bailey, senior vice president of sales and marketing, in the call.
Overall, panel prices have declined from last year’s peak of $4.20 cents per watt to around $2.40 cents per watt today, according to London research firm New Energy Finance. Some analysts expect panel prices could fall below $2.00 in the near future. Panel prices make up roughly half of the total cost of installation, several integrators said.
Yet while installers say they pass on all of the price declines to the customers in the sales of systems, the nature of the tax credit and rebate system pegs rebates to the total cost of the systems.
Massachusetts officials recently recalculated the rebates for commercial and industrial applicants to its Commonwealth Solar program, cutting the rebate from between 50 cents and 90 cents per watt depending on the size of the system. State rebates have shrunk since the program was implemented early last year as cost declined and federal rebates grew.
“This was always the intention, that as the installation industry grew and became more comparative that prices would go down and we would be able to scale back the incentives,” said energy office spokesman Robert Keough. He said the rebates had grown to between 35 percent and 40 percent of installation costs, and the new rebates would bring the rebates down to the intended rebate level of 30 percent of costs.
In addition to shrinking state incentives, other costs, particularly labor costs, are going up. Regulations now require licensed electricians to handle all components of solar installations, which command higher wages than laborers.
“We had to retrofit with all new electricians, and so at the end of the day the total price has remained relatively constant,” said Dan Leary, president of North Andover integration firm Nexamp Inc.
Indeed, Leary said the payback period for most solar panels has stayed around five years for most installations.
Yet Neagle of Borrego Solar said he believes the combination of a recovering economy, new financing plans and a net metering law that allows large installations to resell power back to the grid is creating “for a number of customer classes a perfect storm and it’s the right time to really take advantage of what’s happening in the market.”
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