It’s been said before and will continue to be indefinitely into the future: Now is the time to switch to solar energy.
Yet for as often as it’s been repeated, these really are the days to consider going solar, as a storm of potential issues have appeared in the present and on the horizon that could change the current sunny circumstances.
As more people and businesses turn to solar installation to lower their energy costs and carbon footprints, the industry is feeling a squeeze that could put a damper on some who have aspirational goals to install solar panels. Let’s take a deeper dive.
Energy rate increases are a reality. Consumer electricity prices have risen almost 30 percent on average over the last 10 years, and depending on location, could increase by another two or three percent every year. In fact, Xcel Energy has proposed a 20 percent rate increase over the next three years, and Minnesota Power announced a planned 17.5 percent rate increase. For an electric bill of $150 per month, that’s an increase of about $30 without making any changes in energy use.
The average size solar energy system installed in Minnesota is 5 to 6 kilowatts (kw) at a cost of between $13,048 to $17,652, according to EnergySage. With solar panels installed, energy rates are locked in for the lifetime of the system - typically 25 to 40 years, depending on the product, warranty, and maintenance. Even if a loan is used to finance the solar project, the time it takes for the system to pay for itself is generally between eight to 12 years.
Meanwhile, a household still “renting” electricity from the utility company will have paid between $17,280 to $21,900 over just ten years with nothing to show for it and an expectation to continue paying for energy by this method forever. That money could easily have paid off a loan for “ownership” of energy production instead.
Price decreases threaten to reverse course. The cost to install solar panels in Minnesota has come down by about 80 percent over the past ten years according to Solar Reviews, and for the most part, prices have stabilized. After all, there’s only so much the price of solar components can decrease, while the cost of labor continues to be fairly consistent. However, a price rise could be on the horizon due to supply chain instability.
The COVID-19 pandemic has interrupted nearly every industry, and solar is no different. Shortages of polysilicon and steel, two necessary materials for panels, have made their impact known already. That coupled with an increase in shipping costs and delivery delays could push the costs upwards even as solar incentives are winding down.
Solar power is limited, but not by the sun or the weather. Most solar energy systems are constrained by the grids to which they are connected. For a variety of reasons, the majority of solar power systems must be connected to a utility grid, even when a battery for energy storage has been installed. Any time excess energy is generated by the panels, it gets sent back to the grid so it can be used elsewhere - an energy-for-credit exchange most commonly referred to as “net metering.”
However, the existing transmission lines can only handle so much of this dispersed, small-scale energy generation, as many network elements were installed years before solar contributed much to the grid. These structures will need to be updated before local residents and businesses can gain approval to have solar installed. Some potential solar customers have already been told it could be more than a decade before their application to get solar will even be considered. Entire communities have reached the limits of solar capacity for the next 20 years.
Solar rebates have limitations and are decreasing. The federal solar tax rebate used to be 50 percent and is currently 26 percent, but is slated to decrease in 2023 to just 22 percent. The Dakota Electric Association rebate will decline on January 1, 2022, from an incentive that could reach as high as $4,000 down to just a $500 flat interconnection fee rebate. The Xcel Energy Solar*Rewards rebate is reinstated, it will pay almost half what it did in previous years. The idea is that the smaller rewards will stretch further to help more customers switch to solar.
Incentives are dwindling at the same time as the cost of solar installation has decreased. That’s part of what incentives are meant to do: make a newcomer on the market more affordable until it reaches critical adoption rates. Now that the market for solar is more established and prices are coming down, incentives might disappear altogether in the not-so-distant future.
Limited labor availability and calendar space. There is currently a labor shortage striking nearly every industry and solar installation is also feeling the crunch. The number of installers on the payroll limits the number of solar projects to which each solar solution provider can commit. If the calendars get full with the available crews and installers are unable to hire more solar professionals, customers will have to wait until the next year or find a different solar provider that has the space. In that case, the design options, workmanship, and price will likely differ.
In the chilly northern states like Minnesota, heavy snows, frozen ground, and icy roofs during the winter put a damper on solar installations, further constraining scheduling availability.
There’s still plenty of good solar news to go around. Currently, incentives are still available, even if some of the rebates have decreased in size. Additionally, in some cases, as long as a rebate or credit application is received by the deadline, the installation can occur in the following year (though this isn’t true for all incentives - consult with a solar expert). That could be helpful for giving some people or businesses more time to prepare for solar.
One upside for the pandemic situation is that getting a loan for solar is as easy and as inexpensive as it gets. Interest rates for a variety of loans are at historic or near-historic lows. More and more financing options seem to be entering the market, too, ranging from 8 to 20 or more year terms with interest as low as 0 percent. In many cases, the contract can be signed with zero money down.
Every year, All Energy Solar makes switching to solar energy easy for property owners of all kinds — residential, commercial, agricultural, municipal, and more. As a trusted leader in Minnesota solar energy, our industry experience allows us to confidently handle every aspect of the solar process. From initial energy analysis and concepts, engineering and design, construction, and monitoring, our team prides itself on being experts in all aspects of our field.