Ok. So you had read that solar panel and solar power plant prices have been falling in the past five years. You also have a hunch that they will continue falling.

If this is indeed true, isn’t a smart move on your part to wait for a while before putting in your money in a solar power plant?

The answer to this question needs both some history and some perspective. Here’s a bit of both.

First, the history. Yes, solar panel prices have been falling last many years. However, while the fall in solar panel prices was sharp between 2007 and 2014, from 2014, the price decrease in solar panels has been relatively gradual. For example, in 2014 solar panels, cost about 70 US cents per Watt, declined to about 65 cents per Watt in 2015 and gradually to about 50 cents per Watt in the first half of 2016.

There were some sudden disruptions in the latter half of 2016 and early 2017, when the panel prices declined steeply to less than 40 cents per Watt making many to start wondering if they should wait for further such decreases.

Now for some perspective. This steep decline in 2016 had nothing to do with any fundamental technology or market changes, but had more to do with the China Factor.

The China Factor?

You see, most solar panels are made in China, which should not surprise you. Owing to the massive capacities the country has built up, there are times when there is much higher capacity available than the domestic Chinese market could take.

This was what happened in the second half of 2016, when growth in solar panel consumption slowed down significantly. The prices of solar panels nosedived as manufacturers hurried to sell off large inventories.

Until the end of 2017, the panel prices are expected to remain low (around 35 US cents per Watt) due to this Chinese supply-demand situation.

However, it is unlikely that such dramatic price reductions will continue, or at least happen consistently. Solar Mango expects only a 3-5% average annual decrease in solar panel prices between 2017 and 2020, and perhaps even smaller annual decreases from then on.

Our inference/forecast on costs & prices hence is: If you are planning to wait for dramatic solar panel price reductions to happen in the near future, you will likely be disappointed. Put another way, now is as good a time as any time for you to invest in your solar power plant.

Stuff to Remember

Waiting for solar panel and solar power costs to decrease dramatically is not a good idea. Cost decreases from now on will be gradual, about 3-5% per annum.