Residential solar is an attractive option for consumers by reducing their exposure to utility rate hikes, the president of a solar energy firm said, even as the cost of installing solar energy has increased in the last two years due to inflation, shortages and other factors.
Asim Hafeez, owner and president of Empower Energy Solutions, said in an interview that even though the initial steep cost of solar installation has become more of a hurdle due to recent interest rate hikes, solar is often cheaper in the long run.
“Even if you have a 10% higher solar cost this year versus last year, a consumer is comparing it to their electric bill,” he said. “So their electric bill may have increased 30 to 40%, while the cost of solar is an extra 10 to 15% versus what it was a year ago.”
In 2022, U.S. consumers on average paid 14.3% more for electricity than the previous year, according to Consumer Price Increase data.
Until recently, solar energy had seen a steep increase in affordability. Supply chain constraints for solar panels, as well as overall labor shortages have contributed to an uptick in cost over the last two years.
The P25 solar index, the most competitive 25th percentile offer price, increased 8.2% in the fourth quarter and rose 33.3% year over year as the U.S. solar sector “continues to navigate through immense regulatory uncertainty and logistical complexity,” wrote LevelTen Energy in the fourth quarter 2022 edition of its regular price index reports for energy power purchase agreements.
Solar installations also dwindled in 2022 in comparison to the installed capacity added in previous years – except for residential solar, which had a “historic quarter” in the third quarter of 2022. 1.57 GW of residential solar was installed that quarter, a year-over-year increase of 43%.
“American families are increasingly turning to solar power to help save on their electricity bills,” Alex Hobson, the senior vice president for communications at the American Council on Renewable Energy, said in an email. “The price to install solar has fallen precipitously over the last decade, making it the most affordable electricity option in many scenarios.”
“Before solar, consumers never had an option before,” Hafeez said, comparing the “natural monopoly” of an energy utility to a cable provider like Xfinity, and solar to streaming services. “It's the same exact concept, where solar is the first time somebody's had the option of getting their electricity from a different source than the natural monopoly.”
As energy consumption continues to go up in the U.S., the government is increasingly rewarding the production of energy with financial incentives such as tax credits for oil drilling or renewable energy installation, he said, but “installing solar panels is one of the average person’s only options for taking advantage of those incentives,” Hafeez said.
“For a consumer, they can’t just start drilling oil in their backyard, they can’t put a nuclear power plant in their backyard, they can’t put massive wind turbines in their backyard,” he said.
Empower Energy Solutions offers zero-down financing options for solar installations, but Hafeez said that increased borrowing costs due to interest rate hikes have made this option less attractive to consumers in comparison to power-purchase agreements and leasing.
When solar panels became more scarce as a result of a U.S. Department of Commerce tariff investigation, the enactment of the Uyghur Forced Labor Prevention Act and the pandemic’s impact on the supply chain, Hafeez said the uncertainty was difficult for residential solar consumers.
“There was definitely a very long stretch, like seven months to a year, where consumers signed contracts for certain panels and retailers had to go back to customers and either adjust timelines for potential installs or say, ‘We can get you solar panels, they'll look similar, but we can't guarantee which ones they'll be,’” he said. “Which has made for an interesting last year or so, because the average consumer is not used to that, at that kind of a purchase price.”
