One of the biggest challenges for renewable energy has historically been the high cost of its implementation. However, as a recent report by GTM Research points out, Solar energy installation prices will continue to decline by up to 27% by 2022. Although we have already reached and passed that date, the impact on the market is still significant, and the price drop has been progressive. Solar prices gradually fell, on average by 4,4% per year until reaching a reduction of 27%. This decrease is excellent news for those who wish to invest in more sustainable energy sources.
Solar energy prices drop
The GTM Research report details that the cost of solar installations has not only decreased due to the lower price of solar modules, but also due to the reduction in the prices of other components such as inverters, solar trackers and labor costs. This has allowed solar energy to become increasingly accessible in various regions of the world.
A notable case is India, where the auction system has forged a highly competitive market, resulting in record-high project prices. According to the report, large-scale PV systems in India have reduced their costs to just 65 cents per watt, a price unimaginable a few years ago. The main reason behind these low costs are the low labor costs and other soft costs in the country.
Global trends in solar energy prices
Globally, prices for crystalline silicon solar panels, the most widely used, have shown a progressive decline. According to a report by the International Energy Agency (IEA) In 2022, the average price of a module in Spain was 0,22 €/W, a figure that follows the trend of cheaper photovoltaic technology.
In addition, prices for turnkey photovoltaic systems—small installations such as those used in the residential sector—were between 1,6 €/W and 1,7 €/W, depending on the size and type of installation. This reduction in cost has been favoured by both increased demand and technological advances.
Solar industry in 2023 and projections
During 2023, the solar energy sector has continued to grow in Spain, with an installed self-consumption capacity of more than 3.008 MW, reflecting the growing interest in solar installations in homes and industries. Self-consumption has been especially beneficial for the industrial sector, which has accounted for 47% of new installations. On the other hand, the residential sector has accounted for a 32% and the commercial sector a 20% of the total number of new installations.
In terms of installation costs, the average price for self-consumption systems for large consumers connected to the grid has dropped to 0,67 €/WIn large centralized plants, prices range from 0,59 €/W and 0,62 €/W, which demonstrates the competitiveness that solar energy has achieved compared to other energy sources.
Factors that influence installation prices
- Number of solar panels: The number of panels directly affects the total cost of the installation. The more panels are needed, the higher the cost of the panels.
- Quality and technology: Monocrystalline solar panels are more efficient than polycrystalline ones, which also influences their cost.
- Location: Depending on the autonomous community or country, prices vary due to differences in labor costs, regulations and availability of local subsidies.
Surplus compensation and return on investment
Return on investment is one of the main concerns for those installing solar systems. Fortunately, owners of photovoltaic installations can benefit from the surplus compensation, which allows them to sell the energy they do not consume. The average price for self-consumption surpluses is between 0,05 €/kWh and 0,10 €/kWh, depending on the marketing company.
Some electric companies offer rates with virtual batteries that allow these surpluses to be stored and used in periods of lower solar production, which maximizes savings. For example, Octopus Solar offers a rate with 0,05 €/kWh for surplus and access to a virtual battery. This system allows users to effectively reduce their bills by storing surpluses for the future.
Self-consumption not only allows for a significant reduction in electricity bills, but is a solution that promotes sustainability and facilitates the energy transition.
With the arrival of subsidies and aid for the installation of solar panels, the average payback time for an installation has decreased considerably. According to the most recent data, the period required to recover the investment ranges between 5 and 7 years, depending on the size of the facility and the amount of energy generated.
Solar energy has established itself as one of the most efficient and economical options for self-consumption, and over the years it is expected that costs will continue to decrease, making solar energy accessible to a greater number of homes and industries.
This continued price decline, combined with technological improvements and increasing government support, continues to drive solar market growth worldwide. As demand increases, prices will continue to stabilize and become more competitive with traditional energy sources.