There’s a big new solar tax credit in town.
A federal incentive expanded in 2022 through the Inflation Reduction Act can offset 30% of the cost of a residential solar installation. That’s obviously good news for individual customers — but it’s also great news for the solar industry as a whole.
With a decade’s worth of certainty built into these federal incentives, the price of solar is poised to continue its precipitous drop, and become even more accessible for American homeowners. While inflation and higher interest rates have thrown some curveballs, the industry still set a record for rooftop solar installations in 2022.
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“If anything, the IRA just helped supercharge an already-hot market,” said Shawn Rumery, senior director of research for the Solar Energy Industries Association.
Here’s what experts are saying about how the cost of solar is changing — and what you can expect in the next five to 10 years.
Costs will continue to drop
The cost of solar has been falling for a long time.
“Over the last decade, prices have come down by over 50% in the residential space,” Rumery said.
The average cost of a rooftop solar system now hovers around $25,000. It’s down from about $50,000 just a decade ago, thanks to decreasing material costs, as well as gains on the installation side, with the labor and permitting processes becoming a lot more efficient. “You’ve really seen, across the board in the last decade, costs coming down. And that’s really enabled solar to flourish,” Rumery said.
He expects that trend to continue, despite some temporary flattening of solar prices due to supply chain disruptions.
A big reason why solar prices could continue to drop is significant development in the solar industry at large.
The industry will mature
The federal solar tax credit will be in place for at least the next 10 years. That means players in the solar industry — from installers to manufacturers — have received a green light to invest in their operations.
“The permanence of it is good for the industry, it’s a good signal for developers,” said Pamela Frank, vice president of Gabel Associates, an energy consulting firm. “That generally will benefit consumers.”
Installers can grow their staff and streamline their processes even more, Rumery said, and manufacturers can make long-term investments at scale. “The market certainty created by the [Inflation Reduction Act] really helps in that front,” he added.
This will likely translate to cost savings for consumers. With economies of scale, and the potential for new domestic solar manufacturing facilities, the solar panels themselves will become cheaper and easier to ship — addressing some of the international supply chain issues currently facing the industry.
Some obstacles will remain
If there’s anything to temper the good news of the federal boost for solar, it’s at the state and international levels.
Globally, supply chain issues have affected nearly every industry and exacerbated price inflation for all kinds of consumer products. Solar is not immune to that, and it’s causing some modest cost increases for the residential market. “We need supply chains to improve,” Rumery said.
And despite strong support of solar from the federal government, state-level policies remain something of a patchwork. “The market is heavily influenced by state policy,” Rumery said.
In states that offer generous incentives to stack on top of the federal credits, Rumery expects solar to get even more affordable. But in states where that sort of policy is lacking, he said that affordability and adoption will lag.
Energy storage will take off
Solar panels are one expensive thing. A battery to go with them — and which will really help you get the most out of them — is another.
“The single biggest new thing for customers is the pairing of solar with energy storage,” Frank said.
Homeowners are increasingly adding a big battery to their solar installations. As more intense storms ravage the country, and grid outages become more common, pairing solar with storage gives you a reliable source of backup power.
“The costs on storage — it’s not cheap, it’s still expensive, but you’ve got tax credits for this,” Frank said. The same 30% federal tax credit that’s available for solar can also cover a home battery installation.
And just like with solar, increasing demand for home batteries will drive down costs as more people adopt the technology. “We are seeing that pairing, because quite frankly, it just makes sense,” Frank said.
Your neighbors will become your allies
For all this talk about affordability, a solar system is still going to run you more than a few thousand dollars — but there are ways to save some additional cash.
One powerful way to make solar more affordable is partnering with your neighbors. If you can convince three or five other homeowners in your neighborhood to pursue solar, you can approach a solar installer together and negotiate for something like a bulk discount.
Also keep an eye out for neighbors who already have solar: They can be a great source of wisdom and recommendations. “People that do solar, they become sort of evangelical about it,” Frank said. They might be able to answer your questions or point you to a reputable solar installer.
Your neighborhood could also become a source of further federal solar discounts. The final details are still being worked out, but Rumery said the Inflation Reduction Act includes additional credits for low- and moderate-income homeowners, and for those living in neighborhoods near fossil-fuel plants or other polluting industries.
“The [solar] industry is really trying to make inroads to low- and moderate-income communities. And I think that’s something we need to continue to do,” Rumery said.
If all else fails, whether you’re a homeowner or a renter, you can also look into community solar. This allows you to subscribe to receive energy from a large solar farm in your area, without installing panels on your roof.
Solar will become a lot more common
As it stands now, rooftop solar is viewed by many as something of a novelty. After all, solar only accounts for 5% of US energy production.
But Rumery sees a not-too-distant future where that changes. His organization predicts that, by 2030, about 20% of all US energy production will come from solar. That could translate to even more cost efficiency for consumers, and render rooftop solar as common an appliance as a dishwasher, Rumery said.
“As we look five or 10 years down the pipe, I don’t think the question is going to be, ‘Can you afford to go solar?’ It’s going to be, ‘Can you afford not to go solar?'” Rumery said.
And while costs very well may continue to drop, Frank says it’s not worth waiting for a big price breakthrough to invest in solar.
“This is as good a time as any,” she said.