The cost of going solar in New Jersey has dropped by half in the last five years, which is good news for homeowners. But solar installers are now under pressure to cut corners on quality. Call EcoMen Solar at 732-SOLAR-NJ.
I’m sure you’ve heard about how prices for solar power have come down dramatically in the last few years. But you may not be aware just how big the price drop we’ve seen in solar is vs other energy sources.
Author Brian McConnell found that, when adjusted for inflation, the prices for major sources of energy have actually stayed relatively stable over the last 30 years. By contrast, the price of solar has seen a huge decline. Check out McConnell’s chart, where solar is the line with the sharp drop:
In New Jersey alone, the price of solar installations has fallen 55% over the last five years, according to the Solar Energy Industries Association.
Five years ago, an average home solar system in New Jersey went for $45,000 or more before incentives. Now, the cost for a 5 kilowatt home solar system in the state could come in under $20,000.
As a result of massive price drops, the growth of solar in the state has been spectacular. With about 2,390 megawatts of solar panels installed across the state, New Jersey ranks #5 (right behind sunny Nevada) for the amount of solar PV installed. Our growing solar market has helped support thousands of jobs at more than 350 solar installers. With all those installers, consumers have many choices when they want to go solar at home.
So, there’s no question that cheaper solar = more solar. That’s good news for everybody.
But unfortunately, there’s a catch.
A Race to the Bottom
The catch has to do with when industries grow quickly, as solar has. In a crowded solar market, too many solar installers rely on slashing prices to stay ahead of the competition and attract new customers. And that can lead to low quality work where solar homeowners suffer.
In the hottest solar markets, including New Jersey, it’s gotten harder and harder for solar companies to beat each other on price while still making enough money to stay in business. This is not just a problem if you’re a solar installer like me. It’s also a big problem for homeowners. Here’s why.
Home solar has gotten so cheap that solar installers can’t cut prices any further unless they start to cut costs in essential areas that will affect quality.
The problem comes when prices fall below the point at which solar installers can make a sustainable profit by doing good work. And that’s exactly what’s happened in New Jersey over the last few years.
In New Jersey, the average solar installer is lucky to make 5%-10% profit on average. It may be hard to believe, but some super low-price installers may actually lose money in order to make quick sales for a couple years, and then declare bankruptcy, walking away with whatever money they’ve earned.
Before they close their doors, ultra-low-price solar installers will try to win the race to the bottom by cutting their own costs in order to keep cutting their prices. And that’s when consumers really suffer.
Cutting Costs: All the Fat is Gone
Unfortunately, when solar installers want to cut their own costs to offer lower prices to consumers, it’s not easy to just cut out the fat while sparing the bone.
It’s difficult to cut costs for advertising and salespeople since installers always need to find new customers. Nor can companies cut costs for insurance or necessary items like permits since their fees are fixed.
So, if installers want to cut their costs, they’re going to have to focus on the three areas that will affect homeowners the most:
- Cutting Corners on Solar Panels. Using cheap solar panels can cost homeowners big money in the long run. Lower quality solar panels may produce less energy at the beginning and not do as well as better panels over time. That’s why EcoMen Solar insists on high quality equipment, including American-made SunPower solar panels, the top PV modules available for home solar today.
- Cutting Labor Costs. You don’t need to know anything about the solar industry to guess that paying your installers less per hour will not attract the best people to your company. Yet, one of the top ways for low-price solar installers in New Jersey to cut costs is to pay their people less. You can guess how this turns out for the homeowner – a higher risk of botched work that needs to be fixed later on.
- Cut-Rate Customer Service. Even if an ultra-low-cost solar company is still in business by the time something on your solar system breaks, their response times will probably be longer than better solar installers.
Solar Company Churn
New Jersey has seen a lot of turnover in solar installers recently, starting with the national companies like NRG, Sungevity and SolarCity/Tesla.
Since their Wall Street investors were pressuring management to make the companies profitable, these companies put an emphasis on quantity over quality. As Bloomberg News explains, “Cash flow and profitability became leading industry buzzwords. Investors began focusing on companies’ marketing and unit costs, while debating the financial merits of long-term leases versus sales, either paid with cash or funded with loans.”
As a result, big national installers cut corners on home solar installations around the country as they did in New Jersey, doing low quality installations and offering terrible customer service. That made homeowners so unhappy that they covered sites like SolarReviews.com with complaints about the big national companies, helping to drive them from the state.
Meanwhile, also feeling the squeeze of low profits, many local and regional companies have stopped serving homeowners in New Jersey or have gone out of business altogether.
That’s why New Jersey is already seeing a shakeout, with weaker companies disappearing. In the long run, there will be fewer solar installers serving the state. That will mean less choice for consumers. But hopefully the choices remaining will be better ones. The solar companies that remain will need a sustainable business model and a clear commitment to high quality and customer satisfaction.
Unfortunately, in the meantime, too many solar installers in the state still think they can win the race to the bottom, always submitting the low bid just to get the deal, no matter how many corners they must cut.
Protect Yourself from Ultra-Cheap Solar
The obvious point for homeowners is that the buyer should beware. As with anything having to do with your home, the cheapest is not usually the best. This doesn’t mean you have to go with the most expensive option, of course. To get the best value in home solar, you just need to balance price and quality.
Finally, you should always be skeptical of the lowest bid for a solar installation. If a solar quote sounds too good to be true, then you can be sure that it is really too good to be true.
A company that sells solar too cheap will need to cut corners to give you a low price, which can cost you money to fix things in the future. And if the company can’t make a reasonable profit, then it will soon go out of business. If you buy solar from a company that folds or leaves the state, then they won’t be around if you need their help in the future.
As you compare bids – and you should always get at least two quotes for a home solar installation – look at the company’s qualifications and read their customer reviews. For more advice, see my article “5 Steps for Choosing the Best Solar Installer for You in New Jersey.”
EcoMen Solar’s prices are always competitive when you understand the value of solar done right the first time. Ask us for a free quote today.
Top photo: fsse8info via flickr.