Should I install solar panels now, or, wait for the technology to improve and the costs to come down further?
Homeowners often wonder what is the right time to go solar – Should they wait for the technology to improve further, or, wait for the costs of solar panels to come down further? In reality, an investment in solar panels is a long-term investment – solar panels have a useful life of over 25 yrs and once you install them you start saving money from day one with savings increasing every year throughout the lifetime of the system.
Let’s use an example to understand this. Let’s say your monthly electricity bill on an average is around Rs 3000 per month. At Bangalore, this would increase, conservatively, by 6% in the present year in line with the increases seen in the past 5 years. This implies your additional expense for the current year would be Rs 180 per month, or, Rs 2160 annually. Now, if you had installed a 3kW solar power system with storage (i.e. a hybrid solar power system) at the beginning of the year, you would have saved approximately 76% on your existing bill, that is, your monthly savings would have been around Rs 2300, or, Rs 27,600 for the entire year. Thus, the total cost of delaying your decision by one year is – Rs 27,600 (in missed savings) + Rs 2160 (increase in bill that could have been avoided), equaling Rs 29,760 for the entire year.
The savings during the first year would increase slightly below 6% every year as your savings are due to the grid power you are not consuming now (cost of grid power increases at 6% every year) while factoring a slight decrease in the production capacity of your panels (approximately 0.5%).
Now, let us say, solar panels were to get cheaper by 5% during the current year then by deferring your installation to the next year, you would save around Rs 4,500 for a 3kW system. These savings as can be seen are far lower than the savings you would have had otherwise from a reduction in your electricity bill.
As far as technology is concerned, there are incremental improvements being made to the efficiency of solar panels every year (approximately 0.3% every year) but the resultant increase in energy production you would get by installing more efficient solar panels is marginal when compared against the missed savings opportunity each year. Polycrystalline solar cells – the dominant technology with over 90% market share for the past 20 to 30 years, has the best price-to-benefits value proposition and this is not likely to change in the foreseeable future. In the rare event, if a significantly superior solar technology were to become mainstream, you can always swap out your old solar panels for the new technology should the economics for doing so become very attractive.
In case of hybrid solar power systems, or, solar power systems with storage, you can also systematically increase the solar capacity based on your budget by adding more solar panels over a period of time. While this might require you to replace your solar inverter and increase battery capacity as well, the solar systems are in general, modular. This modularity typically does not exist in case of a grid-tied solar power system, as under the net metering scheme, it is typically not possible to add more solar capacity to the existing 25 yr. power purchase agreement signed with the Utility company.
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