Brad Plumer at vox.com describes why solar panels are getting cheaper. Interestingly, it’s no longer due to the glut in supply from Chinese overproduction and subsidies:
1) Solar modules are getting more efficient. “This doesn’t necessarily make the modules themselves cheaper,” [GTM Senior Vice President Shayle] Kann says. “But as modules get more efficient, you can get the same amount of power in a smaller area of your roof, which makes it easier to install, you need less racking and wiring, and it saves money on balance-of-systems costs.”
2) System manufacturers are facing pressure to cut costs. Again, back in 2008 to 2012, panel manufacturers faced a lot of competition and pressure to cut costs. Nowadays, that same pressure applies to the people making other parts of solar systems — the racking, for instance.
3) Economies of scale. Historically, the residential solar market consisted of thousands of small local installers who had high costs for finding new customers. But nowadays, the rooftop solar industry is dominated by some large companies — particularly SolarCity and Vivint, who had half the rooftop market in the second quarter of 2014. “So as the big guys gain more scale,” Kann says, “you see some savings out of that.”
Looming ahead is the planned expiration of the 30% investor tax credit at the end of 2016 for all residential owners (it drops to 10% for third-party installers like SolarCity). My hope is the renewable lobby will successfully extend it. With prices coming down, the need for a 30% credit will probably be lessened. But some kind of diminishing tax credit will be important to maintain, especially as long as dirty power producers get to pollute for free.