Trade Spat Increases Solar Prices

A Decade of Declining Prices

In less than a decade, the solar industry in New Mexico has experienced a broad transformation, due in large part to rapidly plummeting prices for solar panels and associated equipment.  Just a decade ago, solar PV was, for the vast majority of New Mexicans, an idealistic hobby that made no economic sense whatsoever.  An average residential solar installation (approximately 5 kW DC) would cost anyone in the PNM service territory, or frankly anyone in New Mexico generally, approximately $10,000 per kilowatt, or approximately $50,000 for that average size system. Starting in 2008, those prices began to rapidly plummet but were still upwards of $40,000 for that same installation.

By comparison, the full retail price of that installation today would be less than $18,000.  After state and federal tax credits, the installed net cost of that system would be just over $10,000.  If you’re counting, that’s a 65% decrease in less than 6 years! 

What this has meant for many New Mexicans, especially those in the PNM service territory, is that the installation of solar energy systems have long since reached the point where they make financial sense.  Beyond the environmental benefits, these systems put hard dollars into New Mexico pockets the minute they are commissioned.  As importantly, the installation of thousands of these systems just in the past few years has provided a bright spot to New Mexico’s economic picture, creating hundreds or even thousands of jobs in various sectors of the solar PV industry.

A Recent Solar Price Uptick

But for the first time in a decade, prices are actually experiencing an uptick.  While we had seen prices begin to level out over the past year to two years, the prices are actually starting to increase again now, due almost entirely to a pending trade case before the International Trade Commission.  The trade case was filed by, ironically, a German‑owned company by the name of SolarWorld.  We’re getting a serving of sour kraut with a side of apple pie!  The case is cast as one seeking to protect U.S. manufacturing jobs in the solar manufacturing sector but has been opposed by many as a case that threatens the solar energy industry in the U.S.  The dispute centers on the Chinese government’s alleged subsidization of its solar panel manufacturing sector.  While there may be some truth to the allegations, China’s rapid expansion of its manufacturing capacity in recent years, clearly over‑producing relative to demand, has been very good for U.S. consumers, because it has caused prices to plummet.  Regardless of one’s views on the propriety of Chinas’ role in solar manufacturing, the net effect has been to make solar energy accessible to practically any property owner who wants to save a little money relative to the current price of electricity.  As summarized by Will Oremus in his February 19, 2014, article on slate.com:

This time, the decision could have big implications for the American solar industry.  Solar panels would get more expensive.  Solar panel installers, which employ far more workers than U.S. manufacturers, would suffer.  On top of that, China would almost certainly retaliate with new tariffs of its own on U.S.‑manufactured polysilicon, a key ingredient in solar panels. That’s what it did last time.

Will Oremus

Uncertainty for Future Solar Prices

The upshot for any New Mexican considering an investment in solar energy is that time is of the essence.  Affordable Solar, in addition to installing hundreds of solar energy systems primarily in New Mexico and in surrounding states, is an active participant in the solar product distribution business.  On the distribution side of the business, we are already starting to feel the effects.  Any of the lower‑cost solar panels that had been previously available to us have been sucked up due to just the potential implications of the as‑yet undecided SolarWorld case.  The mere threat of potential tariffs has already caused a significant tightening in the market.  Solar panel prices have already increased 5% to 10%, an increase that Affordable Solar has worked very hard not to pass along to its New Mexico consumers.

But as a pure economic reality, Affordable Solar will not be able to hold the line indefinitely.  One thing is certain—the cost for installed solar in New Mexico is not going to go down for the foreseeable future.  Under the best-case scenario, it will only increase slightly if the looming trade war can be avoided.  Compared to the cost of installed solar even two years ago, such an outcome would not affect the financial sensibility of a solar installation.  On the other hand, if the case results in the imposition of tariffs, prices will increase significantly in the coming months.

Stay tuned here for updates of this important trade case and its implication on New Mexico solar consumers.

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