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Solar Panels Breaking Even with Petroleum

Renewable energies like solar have come a long way in the past decade. They're more efficient and cost effective than ever, but have they reached the point where they're actually a wiser investment than fossil fuels? If not, when might that switch happen?

The Current State of Solar

The global recession of 2008 devastated demand for solar panels. Government stimulus prevented many companies from going under, and a period that could have set back renewable energy ten years instead saw unprecedented growth. However, most of those stimulus funds have dried up. Home and business owners have less tax credits and other financial incentives to subsidize solar panels. The good times could not have lasted forever, but the end of these tax credits might not be such a bad thing.

Solar panels are cheaper than ever. Since 2008, solar panel prices have dropped 60-70%. They appear primed to continue dropping over the next few years. Eventually, prices will level out as the manufacturing processes become as efficient as possible and companies run up against the price of raw materials. In mid 2012, the cheapest panels sell for about 50p per watt.

Petroleum's Future Competitor

"The world runs on oil" goes back decades, and most people use it whether they want to or not. With diminishing reserves and the falling price of renewable energies, petroleum won't be the most attractive energy source for much longer. Homeowners in the UK generally see energy prices around 12p per kWh.

In the south, homeowners enjoy around 5 solar hours per day, so total electrical generation for a 200 watt solar panel would be 1 kWh. Ignoring installation costs, 200 watt solar panels are available today for around £100. Now this is a bit of math, but that solar panel will take about 830 days to pay for itself, or less than two and a half years. Factor in installation costs, and any solar panels shouldn't take more than three or four years to break even.

Does this mean solar panels are about to reach parity with non-renewable energies? For many people, solar panels are already there. Solar panels typically last decades. If they pay for themselves within a few short years, then homeowners will basically receive free electricity for over a decade before they need to be replaced.

Five years ago, solar panels would not have paid for themselves for ten or fifteen years. The price drop really has been that dramatic since 2008. By 2020, solar panels will be inexpensive enough that anyone can afford them, and the initial investment will no longer be a barrier for purchase.

Will solar panels ever pay for themselves in the first year? While unlikely in the next few years, it's not out of the realm of possibility. Were solar panels to drop to just 19p per watt, about 40% of their current price, they would pay for themselves in the very first year of operation. Until that time, solar panels remain a wise but long-term investment.