Will Solar Get Cheaper to Install? An Analysis of Solar Cost Trends and Installation Impact

Solar power has become increasingly affordable over the years, primarily due to the declining cost of solar panels. However, a significant portion of the total expense now lies in the installation and associated costs.

This raises the question: Even as solar panels become cheaper and more efficient, will the overall cost of solar installations decrease substantially?

Infographic: The Composition of Solar Installation Costs

Understanding where your money goes in a solar installation

Total System Cost for a 10-Panel System: £6,800
- Installation and Labor Costs: £3,650 (54%)
- Solar Panels Cost: £3,150 (46%)

After a 30% Reduction in Solar Panel Costs

Reduced Panels Cost: £2,205
New Total System Cost: £5,855
- Installation and Labor Costs: £3,650 (62%)
- Reduced Panels Cost: £2,205 (38%)

Even with significant reductions in panel costs, installation expenses remain a substantial portion of the total cost.

Breakdown of Solar Installation Costs

Understanding the composition of solar installation costs is crucial. Let's examine a typical residential solar setup in the UK:

Base System Setup Cost (Installation and Labor): £3,650
Cost Per Solar Panel: £315

For a 10-panel system, which many households opt for, the costs are:

Total Panel Cost: £3,150 (10 panels x £315)
Total System Cost: £6,800 (£3,650 installation + £3,150 panels)

In this scenario, installation and labor costs account for approximately 54% of the total system cost. This significant proportion highlights that even if solar panels become cheaper, the overall installation cost won't decrease dramatically due to these fixed expenses.

Impact of Decreasing Solar Panel Costs

Let's analyze the effect of a substantial reduction in solar panel prices:

Current Cost of 10 Panels: £3,150
Assumed Price Reduction: 30%
Reduced Panel Cost: £2,205 (£3,150 - 30%)

This price drop results in a saving of £945 on the panels. However, the total system cost becomes:

New Total System Cost: £5,855 (£3,650 installation + £2,205 panels)

The overall reduction in total cost is about 14%, from £6,800 to £5,855. While this is a notable saving, the high proportion of installation costs means that even significant reductions in panel prices lead to modest decreases in total system costs.

The UK's 4kW Maximum Output Limit

In the UK, most residential solar photovoltaic (PV) systems are limited to a maximum output of 4 kilowatts (kW) without requiring additional permissions or grid upgrades. This limitation impacts the number of panels and the overall system design.

Achieving 4kW with Fewer Panels

Advancements in solar panel efficiency have increased the wattage output per panel. Modern panels can produce around 400W each. Therefore:

Number of Panels Needed for 4kW:

4,000W / 400W per panel = 10 panels

Most residential roofs can accommodate 10 panels, making it feasible for households to reach the maximum allowed capacity without needing larger installations. This means that installations have become smaller and more efficient, but the installation costs per watt may not decrease proportionally.

The Role of Installation Costs

Installation costs include several fixed and variable expenses:

Labor: Skilled technicians are required for safe and compliant installation.
Permits and Administration: Necessary approvals and documentation.
Equipment: Inverters, mounting systems, wiring, and other hardware.
Overheads: Company operational costs, transportation, and warranties.

These costs are less likely to decrease significantly over time compared to panel costs. Labor wages, regulatory requirements, and equipment costs tend to remain stable or even increase due to inflation and market conditions.

Future Outlook on Installation Costs

Limited Room for Reduction

Given that installation costs make up over half of the total expense and are relatively inelastic, the potential for substantial reductions in overall installation costs is limited. Even with continued decreases in panel prices, the fixed nature of installation expenses will likely keep total costs from dropping dramatically.

Potential Areas for Savings

Economies of Scale: Increased adoption of solar may lead to competitive pricing among installers.
Technological Advances: Innovations in installation techniques could reduce labor time and costs.
Policy Incentives: Government subsidies or incentives might offset some installation costs.

However, these factors may only contribute to incremental savings rather than significant cost reductions.

While solar panels are becoming more efficient and less expensive, the overall cost of installing a solar system is not expected to decrease substantially in the near future. This is primarily due to the high proportion of installation and labor costs, which are less susceptible to price reductions.

In the UK, the 4kW maximum output limit for residential solar systems means that most households can achieve maximum capacity with smaller, more efficient installations of around 10 panels. However, the fixed costs associated with installation remain a significant portion of the total expense.

For homeowners considering solar energy, it's important to recognize that while equipment costs may decrease, installation costs will continue to play a major role in the overall investment. Evaluating the long-term energy savings and environmental benefits remains essential when making the decision to go solar.