Episode 616: How Solar Got Cheap : Planet Money Just a few years ago, solar power was an expensive luxury for the environmentally conscious. Now it's a good deal for lots of people. How did solar power get so cheap, so fast?
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Episode 616: How Solar Got Cheap

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Episode 616: How Solar Got Cheap

Episode 616: How Solar Got Cheap

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JACOB GOLDSTEIN, HOST:

All my life, solar power has been the thing that's coming in the future.

DAVID KESTENBAUM, HOST:

Like in science fiction, how are we going to power the "Ring World"? You didn't read it? Good book. Solar panels.

GOLDSTEIN: In the real world though, solar has been this fringy thing. Like, I remember when I was in college, this friend of mine was on the solar car team. But the thing they built wasn't really a car. It was basically just like these giant solar panels and this little like capsule that you had to lie down in to drive the thing.

KESTENBAUM: I had a solar calculator.

GOLDSTEIN: Yeah, solar calculators work. Those are real.

KESTENBAUM: You grew up in California. There were a few rich hippies up in the hills with solar panels on their houses. But it was like a special thing - the sort of thing you'd see in a magazine.

GOLDSTEIN: And that is actually changing - really fast, just in the past couple years. Suddenly, solar power is not just for rich hippies anymore. Last week, I went out to Long Island to meet a guy named John O'Hagan. John is a retired New York City cop. And the day I visited him, a crew of six guys was putting solar panels on the roof of his house.

Tell me about your house.

O'HAGAN: What do you want to know? Where the termites live?

GOLDSTEIN: (Laughter). Well, I don't know. How big's your house?

O'HAGAN: Four bedrooms, two and a half baths. Two stories.

GOLDSTEIN: What's the neighborhood like?

O'HAGAN: This is Farmingville. A nice neighborhood, middle-class working families.

GOLDSTEIN: John is not rich and he is not getting solar panels to save the world.

Does the environmental part of it - is that meaningful to you? Does that matter?

O'HAGAN: Not really. (Laughter).

GOLDSTEIN: If you were an environmentalist or if you just like solar power, John O'Hagan is your dream come true. John O'Hagan is the revolution you've been waiting for. He's - he is not getting solar power for a moral or philosophical reason. He's not doing it 'cause he's worried about climate change. John O'Hagan is getting solar power because it's cheap.

(SOUNDBITE OF PODINGTON BEAR SONG, "BETTER TIMES AHEAD")

GOLDSTEIN: Hello, and welcome to PLANET MONEY. I'm Jacob Goldstein.

KESTENBAUM: And I'm David Kestenbaum. Today on the show, how solar power got so cheap so fast. (Imitates rocket sound). That fast.

GOLDSTEIN: Basically was.

(SOUNDBITE OF SPONSORSHIP)

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KESTENBAUM: The story of how solar power got so cheap so fast is not the story of one breakthrough. There wasn't one engineer in some lab who solved the solar problem one afternoon. It's the story of a few things. You can split it up into three categories. The first category is the one you would expect, though, not for the reason you might expect - the panels. The panels themselves have gotten cheaper.

GOLDSTEIN: John, the guy I met out on Long Island, he was getting 41 panels on his roof. I guess that's pretty typical. When I got out to his house, there was a truck in the driveway and a bunch of the solar panels were just right there, leaning up against the truck.

So is this - this is - can I touch this? This is one of the panels?

O'HAGAN: Yeah, they're strong.

GOLDSTEIN: Right. I guess if it's going on the roof I'm not going to break it, right?

The company putting up the panels on John's house is called SolarCity. It's actually the biggest like residential solar installer in the country. Lee Keshishian oversees the company's east coast installers.

GOLDSTEIN: Eight years ago, how much would a panel like this cost?

LEE KESHISHIAN: A little over $1,000.

GOLDSTEIN: OK. And this panel right here, how much does it cost now?

KESHISHIAN: I would estimate somewhere around 200, 250 dollars.

GOLDSTEIN: So from $1,000 to 200 or 250 bucks...

KESHISHIAN: Yep.

GOLDSTEIN: ...In just a few years.

KESHISHIAN: Just a few years. That's a huge step.

KESTENBAUM: It's a big drop. The reason for the big drop is that some place made a lot of solar panels. You can actually see it. It's written on the back of the panels - little letters.

GOLDSTEIN: So what does this say? So it says Trina Solar, smart energy together. Made in China. OK, ignore most of that. Ignore Trina Solar, ignore energy together, it's just the last bit.

Made in China.

KESTENBAUM: This is not your typical story of China figuring out how to make something cheaper. This is the story, really, of China making a mistake. Basically, China decided when it was going to get into solar panels, it was going to go big. The government set up all these subsidized loans, and Chinese companies built all these solar panel factories - factories after factory after factory. As a result, when all these factories came online around 2009, there was a huge glut of solar panels. The price collapsed.

GOLDSTEIN: Of course, if you're one of the companies in the U.S. or Germany or Japan that's already in the solar business, a glut is not what you want.

LYNDON RIVE: When there's a glut, it is - if we don't lower our cost, we die.

GOLDSTEIN: This is Lyndon Rive. He's the CEO of SolarCity.

RIVE: So you go from lowering your cost as a standard part of the company's mission to - if we don't lower it, we're dead. So when you're given that alternative - death of lower your cost - people become very innovative.

GOLDSTEIN: Different companies went different ways. Some companies did innovate and lower their cost, others died. There was this massive wave of bankruptcies in the industry. And it largely, because of that, played as a bad news story in this country. And there wound up being this little mini trade war between the U.S. and China over the solar subsidies. But, you know, the end of the story is panels did get a lot cheaper.

KESTENBAUM: OK, that's the first thing that has made solar power more affordable - the panels themselves got cheaper. But there is this other major expense. If you want to have solar panels on the roof of your house, you got to pay someone to put the solar panels on the roof of your house.

GOLDSTEIN: You got to pay a lot of people. At John's house, to crew was six guys - four installers and two electricians.

(SOUNDBITE OF INSTALLERS WORKING)

KESTENBAUM: Jacob, have you ever had one electrician out?

GOLDSTEIN: I have.

KESTENBAUM: It's not cheap. I mean, they're handling electricity. It's fine. But installation of solar panels can actually cost as much as the panels themselves. It's a big part of the cost.

GOLDSTEIN: But again, just in the past few years, installation has actually gotten a lot cheaper. As a way it's gotten cheaper is it's gotten faster. You don't have to pay those guys to be out at your house for as long. And when I was out at John's, I actually saw some of the reasons it has gotten faster.

RYAN BARNETT: This is the Zep Tool. This is the end-all be-all of tools.

GOLDSTEIN: The Zep Tool? Led Zep Tool?

BARNETT: Yeah, exactly. (Laughter). One tool to rule them all. Yep.

GOLDSTEIN: That's a guy named Ryan Barnett (ph).

What's a Zep Tool? I mean, it's a wrench. It's basically a wrench. It's got these little marks on it or whatever, but the key thing is it's part of this whole installation system they use.

BARNETT: It's happening. This is, this is the meat and potatoes here.

GOLDSTEIN: About an hour and a half after they get to John's house, the crew is ready to start actually putting in the first row of panels.

BARNETT: And once the first one goes in, it's just - it's just like jigsaw puzzle. One piece will fit to the next one, fit to the next one. And that first row is going to go up in, I don't know, two minutes. Well, let's see. What time is it? Let's see how long it takes.

UNIDENTIFIED MAN: 9:59.

BARNETT: 9:59.

UNIDENTIFIED MAN: You're on the clock, Bry.

BARNETT: Two minutes.

KESTENBAUM: I love how a ticking clock creates tension, even if it's just getting solar panels installed.

GOLDSTEIN: Yeah, so the guys up on the roof, right, right at this point, they're kind of rocking the panels into place. They like lean them and they lower them down. And when they're in there right, they make this crack sound.

(SOUNDBITE OF CRACKING SOUND)

BARNETT: One more time.

GOLDSTEIN: There was six panels in that first row. A few more snaps and it was done.

So it's in. Wait. It's in, right? That's in. That's it. How we doing? What time is it?

BARNETT: Yep. We beat two minutes.

GOLDSTEIN: 10:01:55.

BARNETT: We're a minute and 48.

GOLDSTEIN: To be clear, this little two-minute race, this is just a tiny part of the whole installation, right. But all of this - the Zep Tool, the one tool to rule them all, the whole new system - all of it together means installation really is a lot faster and cheaper today than it was a few years ago.

How long's it going to take?

KESHISHIAN: Four hours.

GOLDSTEIN: Four hours. So how long would a plain-vanilla installation have taken, I don't know, five years ago, ten years ago when you got...

KESHISHIAN: This installation? Probably about two days.

GOLDSTEIN: Two days?

KESHISHIAN: Yeah.

GOLDSTEIN: And now it's half a day.

KESHISHIAN: Half a day.

GOLDSTEIN: That's huge.

KESHISHIAN: It's very huge. Very huge.

GOLDSTEIN: Lee says these guys are going to be done by lunch time.

KESTENBAUM: OK, we got cheaper panels, cheaper installation. What's the cost down to?

GOLDSTEIN: About $25,000.

KESTENBAUM: That's still a lot.

GOLDSTEIN: Yeah that's basically what John said. He's the guy who owns the house.

O'HAGAN: A few years back, we looked into it just for the savings, and every company wanted thousands of dollars.

GOLDSTEIN: Do you have thousands of dollars for panels?

O'HAGAN: That's why there are no solar panels on this roof until today.

GOLDSTEIN: (Laughter).

KESTENBAUM: This was the final obstacle. Who has $25,000 sitting around to buy solar panels and get them installed? I mean, some people do but not a lot.

GOLDSTEIN: But very few, right? It's always going to be a fringy thing if you got to have this money up front.

KESTENBAUM: I mean, I get the math. You're going to make the money back over time, but it's just hard to think about spending $25,000.

GOLDSTEIN: And this right here, this is where we get to the last big breakthrough that's made solar really take off. John O'Hagan is not paying $25,000 to get the panels put up on his roof - less. He's not paying anything. Zero.

KESTENBAUM: He's not buying the panels. He doesn't own the panels. The panels belong to SolarCity.

GOLDSTEIN: The way it works is John signed a contract promising to pay SolarCity a monthly bill for the next 20 years. In the long run, this will cost John more than if he just paid for the whole thing up front out of his pocket, but it makes it workable for him.

KESTENBAUM: And it makes the whole decision for John really simple. Should I go solar? Comes down to a really simple calculation. How much am I paying on my electrical bill now and how much am I going to pay if I switch to solar?

O'HAGAN: It just seems like a great deal. Cuts the electric bill 40 to 50 percent.

GOLDSTEIN: So how much are you paying now for your power bill?

O'HAGAN: About $180 a month.

GOLDSTEIN: And so you're paying $180 a month. How much do you expect you're going to be paying on this?

O'HAGAN: It should come down to about $100-$110 a month. Once the switch gets flipped and these guys hook me up to the electric box, I'm all set.

GOLDSTEIN: That's it. Just that simple calculation. That is the heart of America's rooftop solar boom. It's a guy who doesn't particularly care about the environment, a guy who's not trying to make a statement. It's a guy who's saying, if I get solar panels put on my roof today, my power bill is going to go down next month.

KESTENBAUM: There is one problem with this whole set up. If you're SolarCity and you're going to be paying for solar panels on the roofs of people's houses across America, that gets really expensive at $25,000 a house. You do the math, it's like billions of dollars. And SolarCity is a young company. They don't have billions of dollars.

GOLDSTEIN: So here's how they solve that problem. SolarCity and other companies in the industry, they went to Wall Street. They went to big banks and said...

KESTENBAUM: Do you want to own solar panels on people's houses?

GOLDSTEIN: Yeah. Basically right. So these big investors, big Wall Street banks put up billions of dollars, and they essentially own little pieces of solar panels on, you know, houses like John's. And they get this flow of the payments for the next 20 years.

KESTENBAUM: I love that Goldman Sachs may own solar panels on people's roofs across America.

GOLDSTEIN: That's how they solved the problem.

KESTENBAUM: And that is how solar power got cheap. The solar panels themselves got cheap. The one-tool-to-rule-them-all, fancy, fast installation thing and, three, creative financing. There's also four actually.

GOLDSTEIN: Yeah, so four is subsidies, is the government, basically. There's a big federal tax subsidy that is a big deal and that may go down in the relatively near future. A lot of states also have subsidies. I know John is getting a state-level subsidy as well.

KESTENBAUM: Only a small fraction of the electricity in this country comes from solar right now.

GOLDSTEIN: Tiny. Really it's still tiny.

KESTENBAUM: It's very tiny. But it is growing. In fact, you found this report by Greenpeace, who I would expect to be sort of overly optimistic.

GOLDSTEIN: Yeah. The report was called "Energy Revolution."

KESTENBAUM: Yeah, and they missed it. They underestimated where we would be today.

GOLDSTEIN: Yeah. It's - basically nobody predicted it would grow as fast as it has. And today, John is even trying to get his dad to sign up.

Is your dad going to do it next?

O'HAGAN: He's thinking about it. Yeah.

GOLDSTEIN: Really? That's good. Do you tell him, come on, Pop, what do you got to lose?

O'HAGAN: Save a few bucks, Dad. It's 2015; you've got a get with the program. Solar is in, right. (Laughter).

KESTENBAUM: Jacob, you know that is exactly the kind of pitch that works for me. Save a few bucks. So I actually looked into solar a while ago. I got a little flyer in the mail, and I called his number. And the guy's, like, what's your address? And I tell him. I hear this tap, tap, tap on the keyboard. I'm putting you into Google Earth, he says. And he says, is that tree still in your front yard? (Laughter). I said, yeah. He said, are you going to cut it down? I'm not going to cut it down. Sorry, it's not going to work for you.

GOLDSTEIN: It's a nice tree.

KESTENBAUM: It's a nice tree. I'm not cutting down a tree.

GOLDSTEIN: So there are actually a few reasons that solar doesn't work for a lot of people. And, in fact, trees are a big one. Trees or your roof doesn't face the right direction. Another big one is you got to have pretty good credit, right. They're not going to trust you to make this 20-year deal unless you have good credit. A third one is it mostly just makes sense for homeowners. It doesn't really make sense for renters at this point.

KESTENBAUM: So how many houses do they think this might make sense for?

GOLDSTEIN: There's a really wide range of estimates. But from what I read and the people I talked to, it's something like 10 to 20 million. Seems like a pretty safe bet - 10 to 20 million houses, which is about 10 or 20 percent of the houses in the country.

KESTENBAUM: So that's not going to, like, solve climate change, but that is serious. That's not fringy. That is not nothing. That's real.

GOLDSTEIN: What time is it?

KESHISHIAN: 11:53.

GOLDSTEIN: You going to turn it on right now?

KESHISHIAN: So the power light's green. That's a good start.

GOLDSTEIN: What does that mean?

KESHISHIAN: It's getting DC power from the roof.

GOLDSTEIN: So just to be clear, the power that is turning on this light and this thing is coming from the sun.

KESHISHIAN: We're running. We're running. We're creating power.

GOLDSTEIN: That's it. They plugged it in. They plugged it in.

The guys cleaned up the roof. They put the ladders back into the truck. And, David, they were done by lunch.

KESTENBAUM: Where did they go?

GOLDSTEIN: I think they went for wings.

(SOUNDBITE OF JOY WILLIAMS SONG, "SUNNY DAY")

GOLDSTEIN: Thanks to Shayle Kann of GTM Research and David Pomerantz of Greenpeace, who spoke to me for this story. Thanks also to Nadia Wilson, who produced today's show.

KESTENBAUM: We'd love to hear what you think. You can send us an email, planetmoney@npr.org.

GOLDSTEIN: One last thing, a sad note. Caitlin Kenney is leaving us. And frankly, it's a sad night, yes, but it's also kind of a pain in the ass (laughter) because Caitlin Kenney was the person at PLANET MONEY who got everything done and made everything happen. So Kenny, you were the heart of PLANET MONEY. I don't know what we're going to do without you.

KESTENBAUM: Caitlin, I was looking back to try and pull up your very first blog post for us. But it was so long ago, there was no way I was going to be able to scroll back and get it. It was, like, seven years ago. That's how long we've been doing this. We are really going to miss you. Good luck. We love you.

(SOUNDBITE OF JOY WILLIAMS SONG, "SUNNY DAY")

GOLDSTEIN: I'm Jacob Goldstein.

KESTENBAUM: And I'm David Kestenbaum. Thanks for listening.

(SOUNDBITE OF SONG, "SUNNY DAY")

JOY WILLIAMS: (Singing) I open my eyes, look to the sky. Oh, it's a sunny day. The world is looking so...

GOLDSTEIN: Hey, if you're looking for another podcast, check out Snap Judgment with Glynn Washington. Every week, they have human stories, stories about real people. They are also doing a live show in New York City on May 8. It's Snap Judgment. You can find it at npr.org/podcasts.

(SOUNDBITE OF SONG, "SUNNY DAY")

WILLIAMS: (Singing) Give me, give me, give me 'cause it's been so long. I want sunshine, sunshine.

KESTENBAUM: You've never read "Ring World"? It's really good. Solar panels orbiting the sun, and then they have this ring outside with very high walls so the oxygen stays in through centripetal force.

GOLDSTEIN: I think we're almost there man. We're like two years from "Ring World."

(SOUNDBITE OF SONG, "SUNNY DAY")

WILLIAMS: (Singing) I want sunshine, sunshine, sunshine, sunshine, sunshine, sunshine.

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