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Solar Power: The Cost Factor

By Roger S. Conrad on Aug. 13, 2014

Although the costs associated with wind and solar power have declined sharply over the past decade, these renewable-energy solutions still require government support to make the economics worthwhile.

Development of new solar-power capacity is widely expected to drop off sharply after 2016, when investment tax credits for this technology ends and project economics take a turn for the worse.

But the Energy Information Administration’s zero-growth scenario, which factors in technological advances that haven’t occurred yet, calls for a surge in solar-power installations in the late 2020s. This forecast assumes that the cost of solar power drops to levels that can compete with coal and natural gas.

How likely is this scenario?

Let’s examine the average installed price of photovoltaic solar panels, the kind used on rooftops.

Although investors should view the Solar Energy Industries Association’s data with a degree of skepticism, the numbers underscore that the cost of rooftop solar-power installations has declined significantly in recent years–a reality that’s borne out by SolarCity Corp’s (NSDQ: SCTY) surge in installations.

However, the data doesn’t address one of the key factors behind these declining costs: imports of inexpensive solar panels and other components that Chinese companies have dumped on the global market.

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