We read the Tracking the Sun report so you don’t have to

It’s that time of year again - the Lawrence Berkeley National Laboratory (LBNL) has released the most comprehensive study of solar industry trends: their annual Tracking the Sun report. This year's report covers solar systems installed across 30 states, which accounted for nearly 79% of all solar systems installed nationally through the end of 2020. 

Let’s take a closer look at some of LBNL’s key findings as they’re related to residential solar systems for the year 2020, and what it can tell us about the future of the solar industry.

Solar pricing trends 

Let’s cut to the chase. The thing most people want to know about is how much solar panel systems cost. The median installed price for solar systems in 2020 was around $3.80 per watt, the same price listed in last year's report.  

In our experience, solar is not nearly that expensive. We tend to lean more towards $3.00 per watt as an average price for installing solar systems. But then why is LBNL’s median price so high? 

A lot of it has to do with the data sources, as well as the methodology used for analyzing the data. LBNL’s pricing also includes systems purchased with loans, which tend to have a higher price-per-watt than solar systems purchased with cash because of various loan and broker fees.

Solar prices are falling - or are they? 

The price of solar has dropped drastically since 2000, from $12.30 per watt to the $3.80 per watt listed in the report today. That’s a price drop of about 70% over the course of 20 years. 

During that first decade, prices were declining pretty rapidly, mostly due to advancements in technology and manufacturing that made solar equipment cheaper. Starting around 2010, the rate at which solar prices dropped was starting to slow, mostly because equipment technology had started to level off, and soft costs (things like installation labor, customer acquisition, and permitting) were remaining the same. But, prices still continued to drop year after year. 

But in this year’s report, we’re seeing something a little bit different. 2020 is the first year since 2007 that the LBNL’s median price of solar hasn’t gone down. Instead, the median price remained the same from 2019. 

Don’t worry - this is not a cause for concern. 2020 was a weird year for everyone, solar industry included. There were all kinds of delays in permitting and shipping, door-to-door sales were halted, and some solar companies weren’t even sure if it was safe to perform installations because of the COVID-19 pandemic. 

All of these factors could have caused solar pricing to plateau. 

The bigger, the better (and cheaper!)

Another interesting fact about LBNL’s solar pricing data is it shows that the larger the system installed, the lower the price. Median prices to install a large 12 kilowatt (kW) system were nearly $1 per watt cheaper than it was to install a system less than 2 kW in size. 

How does that work? Well, think about Costco. Prices at Costco are lower per-unit than at your regular grocery store because you’re buying in bulk. Shipping and packaging costs are spread out over more units, so the total unit price drops. 

The same thing applies to solar. Those soft costs we talked about earlier, like permitting and labor, are spread out over more watts of installed solar, driving the price per watt down. 

Born in the (expensive) USA 

The first high-powered silicon solar cell was invented in the great state of New Jersey (hence the Springsteen reference). But despite being the birthplace of the modern solar cell, other countries throughout the world actually adopted solar energy much sooner than the U.S. 

The fact that other countries hopped on the solar bandwagon earlier, plus factors like shipping costs, different permitting structures, and lower labor prices have allowed them to offer much lower prices for residential solar installations. 

In fact, America is one of the most expensive places to install solar on the planet. Compare our $3.80 per watt median price to the next-most expensive solar country, Switzerland, where solar costs about $2.50 per watt to install. 

As we said before, there are a bunch of reasons for such a big price difference. Plus, the data and analysis methodology used by the IREA (where LBNL compared their pricing data to) is different from what was used in the Tracking the Sun Report. So, the price of solar in the U.S. versus the price of solar in other countries is a little bit of an apples-to-oranges comparison. 

However, it does show that there is room for improvement in the United States’s solar industry, likely in soft costs. 

Three’s a crowd - third-party owned systems decrease 

Third-party owned (TPO) solar panel systems used to be the most popular way for homeowners to go solar, with 59% of solar systems installed in 2012 being TPO systems. 

Third-party agreements like solar leases and power purchase agreements (PPAs) let homeowners make the switch to solar and save a little bit on their electricity bill without having to worry about the burden of high upfront installation costs. 

Sounds great, right? Well, when homeowners install a TPO system, they can’t take advantage of incentives like the federal solar tax credit or Solar Renewable Energy Credits (SRECs). Plus, because their utility bill is effectively replaced with a “solar bill”, and the system is never paid off, you end up saving less in the long run than if you had just purchased the system. 

Because solar is cheaper than ever, and there are now multiple solar loan options available that let you save more over the lifetime of the system, fewer homeowners are choosing to enter TPO agreements. 

Despite that, there are places where TPO systems still represent the majority of solar panel systems installed. These tend to be in states with robust SREC programs, like New Jersey and Washington D.C., as solar companies really want to reap the benefits of these incentives.

Solar system characteristic trends 

Solar panel pricing isn’t the only thing that’s changed over the years. Physical solar panel systems are now bigger and more efficient than ever. 

Bigger by the day 

Median solar panel system sizes have almost tripled in size since 2000. In 2020, LBNL found the median solar panel system size was 6.5 kW, up from 6.4 kW in 2019. 

California has one of the lowest-median system sizes of 5.7 kW. The Golden State also makes up the largest percentage of solar panel systems analyzed in the Tracking the Sun report, so California is the one who’s responsible for bringing the median down. In fact, most states actually have an even larger median system size of at least 7.5 kW. 

Increasing system sizes are no surprise. As solar has gotten cheaper, homeowners can afford to install more solar panels to cover more of their electric bill. 

Efficient as ever 

Just like system size, solar panel efficiency has steadily increased over time. From 2002 to 2020, median solar panel efficiency ratings have risen from 13.4% to 19.8%. 

The overall higher efficiency of solar panel systems has to do with two things:

• Solar panel technology improving over time, creating more efficient solar cells

• The rising popularity of monocrystalline solar panels

In the past, most solar installations used polycrystalline solar panels despite them being less efficient because they were substantially cheaper than monocrystalline panels. However, the price of monocrystalline panels has dropped. Now that you don’t have to pay a premium for monocrystalline panels, they’ve become the most popular choice among homeowners! 

Solar batteries are the hot new item 

The Tracking the Sun report confirmed what everyone in the solar industry was already thinking: solar batteries are becoming more popular. In 2020, 8.1% of solar installations sampled in the report were paired with energy storage. 

Hawaii has the highest storage attachment rate of any state studied in Tracking the Sun. This isn’t super surprising though, as some of Hawaii’s net metering programs promote the installation of battery storage by not allowing excess electricity to be sent back to the grid. 

California makes up the next largest share of battery installations, which again, is no surprise considering they’re home to the Self-Generation Incentive Program (SGIP), one of the most successful solar battery incentive programs in the country. 

Plus, widespread power outages in response to wildfires has also encouraged California homeowners to use batteries as a form of backup power. As these sorts of climate-related disasters become more frequent throughout the United States and battery storage becomes cheaper, we will probably see the rate of battery attachment increase in the future. 

What does the Tracking the Sun report tell us about the solar industry? 

To be honest, much of the information in the newest Tracking the Sun report isn’t all that surprising. 

Solar pricing and system characteristics seem to follow the same trends as previous years. We will probably continue to see larger and more efficient systems become more common in the future, and battery storage will continue to work its way into the mainstream. 

What will happen with solar pricing is a bit trickier. The rate at which solar prices are falling has slowed over the past few years, and as we pointed out, flatlined between 2019 and 2020. The only way to truly drop the price of solar substantially is by working out the kinks with soft costs, something many are trying to tackle today. 

There have been proposals surrounding how to make solar permitting faster and more convenient by shifting it online, and solar installation companies are constantly trying to improve their sales processes to cut down on customer acquisition costs. 

The solar industry has persevered through a lot these past two decades, and it’s not showing any signs of slowing down.