The cost of generating solar photovoltaic (PV) electricity has decreased by 80% in the last five years and is now below the level of traditional electricity generation. This is because of fierce competition in the market and the introduction of innovative business models which cut costs. As a result, today’s solar PV customer has access to cheap, clean power which they can store for later use. This article will examine how much government spend to produce this renewable energy source – finding out where the money goes and whether it’s worth the investment.
Cost Reductions Through Innovative Business Models
Traditional electricity generation (TEG) is a highly regulated industry; power companies are bound to keep the rates low in order to keep customers and governments happy – but this also means that there are strong barriers to entry, which prevents new businesses from gaining ground.
However, this is changing. As a result of strong competition in the industry and innovation at the business level, TEG costs have been decreasing at a record pace – and this is also reflected in government subsidies. In 2018, the U.S. government will spend a whopping $16,400 on average for every household to subsidize the cost of solar electricity – a drop of over 80% from the $70,200 per household the government spent on average in 2007.
Where Does the Subsidy Go?
Although solar electricity production costs are now at an all-time low, this does not mean that every household can afford to buy solar energy systems. The good news is that the government has your back. They set aside a portion of their renewable energy subsidy to cover the cost of solar installations for low-income households.
This is where Home Energy Savings Plans (HESPs) come in. Created and endorsed by the U.S. Department of Energy (DOE), HESPs are solar investment products that help households save money on their energy bills. When applied for, the government will provide a cash grant for installing a solar energy system, plus an extra $600 per year for 20 years. This makes solar electricity more affordable for average families – and it’s all thanks to the U.S. government.
Government Subsidies Are Helping Create A New Energy Industry
Since 2007, when the global financial crisis first gripped the world, governments have been scrambling to find new sources of energy which are both affordable and environmentally friendly. The answer was right under their noses: solar power. Thanks to the sharp decline in solar electricity prices, every government in the world is now racing to harness this abundant and reliable energy source.
The U.S. government responded to the economic crisis in 2009 by creating a special purpose vehicle called the Solar Loan Program. The program offers quick loans for homeowners with low and moderate-income whose electricity bills are covered by the U.S. Department of Energy’s (DOE’s) Sun Loan Credit Certificate (SBCC). This certificate can be traded like a share of stock and accumulated funds can be withdrawn tax-free.
This is one of the most innovative financial instruments the U.S. government has ever designed. With a quick 15-minute application process, a homeowner can unlock hundreds of thousands of dollars in capital gains and save thousands of dollars per year on their electric bills.
In 2017, the Solar Loan Program (SLP) had over 126,000 applications and $14.7 billion in credit extended – a 500% increase from 2016 and the second-highest year of application ever. The program has helped create a new industry and change the energy landscape for the better.
The Bottom Line
If you’re looking for an environmentally friendly and lucrative way to generate your own electricity, investing in solar power is a no-brainer. The prices of solar PV systems have fallen 80% in the last five years and there are now over 250 million people worldwide benefiting from cheap, clean energy provided by the sun. This is because of innovation at the business level and the commitment to provide cheap and clean energy by governments around the world.
Traditional electricity generation is a mature and well-established industry but the future of energy looks extremely positive as a result of solar power. Governments are committed to making solar electricity more affordable and available for all – and that’s something to celebrate.