Solar Panel Efficiency Over Time

solar panel efficiency over time

A Brief History of Solar Panels

Solar panels have gained immense popularity over the last few years, but they aren’t a novel technology. Back in 1869, Edmond Becquerel, a French physicist, first discovered the photovoltaic effect — the generation of voltage and electric current in a cell when it is exposed to light. 85 years later, solar technology saw a revolution when three scientists, Daryl Chapin, Calvin Fuller, and Gerald Pearson, created the first viable solar cell made of silicon at Bell Labs in 1954.

In the mid-1950s, architect Frank Bridgers, along with his partner Don Paxton, designed the first commercial building in the world to be heated primarily using solar energy. Throughout the late 1950s and 1960s, solar cells were used in spacecraft to power sensors, provide active heating, cooling, and telemetry. The solar cells were found to outlive traditional batteries!

The University of Delaware took a major leap forward when their Institute of Energy Conversion (IEC) built ‘Solar One’ — the first experimental house to convert sunlight into both heat and electricity for domestic use.

Today, the U.S. has 85 gigawatts (GW) of solar PV capacity installed, which is enough to power 16.1 million American homes.

Solar panels on a roof

Here at Smart Solar Energy Co., we have observed that the most significant advancements in solar technology were made during recent decades. These advancements led to major changes in solar panels’ efficiency and price. Keep reading to learn how the solar industry has changed over the years!

How Much Have Solar Panel Prices Fallen?

The first solar panels to enter the market had a very high cost. They were priced at around $300 per watt, while the cost of coal was a mere $2-$3 per watt. When the use of solar cells increased in the 1960s due to their popularity in space programs, the prices fell to just over $100 per watt. Then, in the 1970s, Exxon Corporation funded Dr. Elliot Berman’s research that helped develop a solar cell, further reducing solar panel costs to just $20 per watt.

Solar power’s popularity among homeowners is largely due to the plummeting costs of going solar. Consider this: in the last decade, the cost of solar has fallen by 70%. In 2010, you would have paid $40,000 (approximately $7 per watt) to install a solar energy system that could fully power your home whereas today, it costs around $18,000 (approximately $3 per watt).

This dramatic drop in the prices is the reason why solar has become a popular option among homeowners. But you are probably wondering what has caused the price of solar prices to plummet over the years, so let’s take a look!

Explaining the Declining Cost of Solar

There have been many driving factors of falling solar prices. However, according to a 2018 study by MIT researchers, the most significant factors influencing the cost of photovoltaic (PV) modules can be divided into two main categories:

Low-level factors

These factors are the technology-level factors that have influenced the cost by changing the modules and manufacturing process. The study found that increased module efficiency — the rate at which the cell converts sunlight to electricity — was the leading low-level cause of cost reduction observed between 1980 and 2012, contributing almost 25% of the decline. Two other significant low-level factors found were the decreasing costs of non-silicon materials, such as glass and laminate, and the falling price of multi-crystalline silicon, contributing 21% and 16% of the overall cost decline, respectively.

silicon cell

High-level factors

The next category consists of high-level, more macro mechanisms that may influence low-level factors. Examples are research and development (R&D), learning-by-doing, and economies of scale. The MIT study found that R&D, which included improvements in module efficiency and manufacturing processes, was the dominant factor in the first period — from 1980 to 2001. In the second period, however, economies of scale became the most significant factor driving down costs. The reason is that post-2001, R&D-driven efficiency and material usage improvements slowed down, while manufacturing plants kept growing in size, contributing to a larger percentage share in cost reduction between 2001 and 2012.

All these factors were catalyzed by market-stimulating government policies such as feed-in-tariffs and renewable portfolio standards. With continued improvements in technology and better policy measures, the study suggests that the costs could further reduce.

Solar Panel Efficiency Over Time

The earliest solar cells, developed in the 1800s, had an efficiency of a mere 1%, which was nowhere near enough to make them a viable energy source. Solar technology improved much later in 1954 when Daryl Chapin, Calvin Fuller, and Gerald Pearsons created the first silicon photovoltaic (PV) cell at Bell Labs with an efficiency of 6%, which later rose to 11%. By the 1960s, Hoffman Electronics had achieved 14% efficiency.

Solar cells in the market today have an efficiency varying between 10% and 20% while some of the highest quality solar panels can have efficiency as high as 25%. This means that even the best solar cells cannot convert 75% of the light they receive into usable electricity. In 2019, researchers at The National Renewable Energy Laboratory (NREL) set a world record by achieving a solar cell efficiency of 47.1% in an experimental setting. These super high-efficiency cells, however, are not yet feasible for rooftop panels as they are manufactured using expensive material.

Scientists and engineers are continuously working to discover new ways of boosting solar cell efficiency. Materials like light-sensitive nanoparticles and gallium arsenide, along with technologies like molten salt storage have the potential to offer higher efficiencies at a reduced cost. As developments in solar technology continue and the cell efficiency improves, the cost per watt will come down and the demand for solar will increase rapidly in the coming years.

How Long Does It Take for Solar Panels to Pay for Themselves?

Going solar involves a significant investment and we understand that homeowners often wonder how long it would take for the system to pay for itself. The short answer is: it depends.

First, let’s define what a “payback period” is. A payback period is the length of time required for an investment to recover its initial cost. In other words, we’re looking at how long it would take for you to break even on your solar energy investment.

A simple way to calculate your payback period is to divide the total cost of your system by the annual financial benefits. For example, if your system costs $20,000 to install and you paid $2,000 annually in electricity bills before purchasing the system, then your annual payback period would be 10 years ($20,000/$2,000 = 10).

Since solar panel prices have hit a record low, the payback period on solar panels has decreased tremendously. The average payback period in the U.S. is just over 8 years. However, depending on other factors like the size and output of your system, the total installation cost, the location of your home, and your energy consumption, it is possible to recoup your investment in as few as 5 years. Even if your solar payback period is more than 8 years, it is still a worthwhile investment compared to most other purchases that never bring returns.

Most solar panels come with a 25-year warranty, which means that you will be able to enjoy the benefits of a solar energy system for many years after your investment costs have been recovered.

Home with solar panels

The Federal Solar Tax Credit in 2021

The Federal Solar Tax Credit or the Solar Investment Tax Credit (ITC) has played a major role in supporting the growth of renewable energy in the U.S.

Ever since its enactment in 2006, the U.S. solar industry has grown by more than a whopping 10,000%! The ITC allows you a dollar-for-dollar reduction of 26% of your total cost of solar installation, which will be deducted from your federal taxes. This credit is incredibly straightforward. For instance, claiming a $1,000 solar investment tax credit reduces your federal income taxes due by $1,000.

A solar PV system installed before December 31, 2022 is allowed to claim a 26% credit. It will be reduced to 22% for systems installed in 2023. The solar tax credit expires for residential systems in 2024 while commercial solar energy systems will be allowed a deduction of 10 percent.

To qualify for the solar tax credit, you must fulfill the following criteria:

  1. Your solar PV system was installed between January 1, 2006, and December 31, 2022.
  2. You own the solar PV system (i.e., you purchased it with cash or through financing but you are neither leasing nor are in an arrangement to purchase electricity generated by a system you do not own).
  3. The solar PV system is new or being used for the first time. The credit can only be claimed on the “original installation” of the solar equipment.

One of the best parts about solar tax credit is that there’s no maximum amount you can claim, so it can help you save thousands of dollars, as long as you install your solar panels before the end of 2022.

Energy Trust of Oregon Solar Incentives

In addition to the Solar Investment Tax Credit, the residents of Oregon can further take advantage of cash rebates from the Energy Trust of Oregon that can offset as much as 50% of your solar installation costs. This incentive is available to customers of Portland General Electric (PGE) and Pacific Power and goes directly to your solar installer, reducing your overall solar energy system cost. The incentive amount you’ll receive will depend on which energy provider you’re currently associated with.

For Portland General Electric, the incentive is $0.30 per watt, up to $2,400.

And for Pacific Power also, the incentive is $0.25 per watt, up to $2,000.

Here’s an example to help you understand the incentive amounts. Suppose you are a PGE customer and the size of your system is 6000 watts. The incentive amount will be 6000 $0.30 = $1,800. So, your total cost will be reduced by $1,800. The larger your system is, the higher the incentive amount you will receive.

Should I Wait for Solar to Become Cheaper?

If you’re wondering if you should wait for solar costs to go further down, we recommend you don’t wait. While the cost of solar panels may reduce in the future, from 2024 onwards the Solar Investment Tax Credit will no longer be available to residents. The Energy Trust of Oregon solar incentive is also at its peak, and it will only continue to decrease as more and more homeowners switch to solar energy. This means that the overall cost of solar will go up, even as manufacturing costs decline.

By switching to solar now, you will become immune to increasing electricity costs and reach payback sooner than you will if you choose to wait.

If you’re interested in going solar now but are unable to pay the upfront cost, there are plenty of financing options available such as solar loans, solar leases, and power purchase agreements (PPAs).

The average payback period for solar panel investments in the U.S. is slightly over 8 years, a duration significantly shortened due to record-low solar panel prices. The Federal Solar Tax Credit, in effect until 2024, further incentivizes solar adoption by providing a dollar-for-dollar reduction in installation costs. Additionally, residents in Oregon can benefit from cash rebates offered by the Energy Trust of Oregon. While some may consider waiting for further cost reductions, the imminent expiration of tax credits and decreasing incentives suggest that acting now offers greater benefits, making solar energy a compelling and financially sound choice for homeowners.The rewards you’ll reap by acting now far outweigh the modest cost reductions in the future.

To learn more about your solar options, available incentives, and how much electricity you’ll generate, book a free virtual or in-person solar audit with Smart Solar Energy Co. today.

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