Wednesday, April 18, 2012

Better Than Oil

I often get postcards touting the latest special offers of local oil service providers, but the one that arrived last weekend was different. The company was not proposing to overhaul my oil furnace, or to sell me a new hybrid furnace, or anything at all to do with oil. Rather, it was offering to install a rooftop solar array. It could cut my electric bill in half, the postcard suggested, and federal tax incentives would cover about one fourth of the cost.

It says something about how much the price of solar panels has fallen that even an oil company thinks solar is a better value than oil. Solar panel prices have fallen by about half since 2010. The decline is so great that the leading company that was tracking retail solar prices has stopped doing so. Prices are too low to track in a meaningful way just by comparing this month’s catalog to the month before. Meanwhile, oil prices are within 20% of their all-time high.

One of the things that changes when energy costs change is the relative importance of the labor costs of installation. The work of installation may now account for more than half of the cost of a home solar installation. Meanwhile, the costs of equipment and installation for an oil heater are dwarfed by the cost of fuel for the first winter. It makes sense that an service-oriented business might be more interested in solar energy work now that solar is becoming more labor-intensive.