<story><title>The price of solar power just fell 50% in 16 months</title><url>http://electrek.co/2016/05/02/price-solar-power-fell-50-16-months-dubai-0299kwh/</url></story><parent_chain><item><author>kragen</author><text>3% is an estimate of the rate of economic growth: &lt;a href=&quot;http:&amp;#x2F;&amp;#x2F;www.tradingeconomics.com&amp;#x2F;united-states&amp;#x2F;gdp-growth&quot; rel=&quot;nofollow&quot;&gt;http:&amp;#x2F;&amp;#x2F;www.tradingeconomics.com&amp;#x2F;united-states&amp;#x2F;gdp-growth&lt;/a&gt; As I said above, we should expect the market&amp;#x27;s long-run returns to be close to the rate of economic growth.&lt;p&gt;It&amp;#x27;s true that stocks in the US in the 20th century dramatically outperformed that 3%.  This is for three reasons: first, up to about 1975, the world&amp;#x27;s economic growth rate was higher than 3%, due to the Second Industrial Revolution; second, up to about 1975, the US&amp;#x27;s economic growth rate was even higher than the world&amp;#x27;s, because it was taking over the markets previously supplied by the bombed-out economies of Europe (especially the UK) and Japan.  Third, since about 1970, the share of economic output that went to owners of capital (rather than labor) increased dramatically.&lt;p&gt;Now, the third of those things probably can&amp;#x27;t happen again, because capital&amp;#x27;s share of output is already super high.  (It&amp;#x27;s not that it can&amp;#x27;t get higher, but it can&amp;#x27;t go past 100%.)  The second could happen again, but if it does, the US will be in the position of the UK, Japan, or Germany — it&amp;#x27;s now the Single Superpower (not even a mere Great Power) who could lose market share, probably to China or to a non-nation-state power.  Investors in Japan&amp;#x27;s and Germany&amp;#x27;s stock markets in 1925 or 1935 didn&amp;#x27;t do so well.&lt;p&gt;The first, well, that&amp;#x27;s anyone&amp;#x27;s guess.  It&amp;#x27;s a total wildcard.&lt;p&gt;It&amp;#x27;s certainly reasonable to posit a Third Industrial Revolution, made out of some of free software, nanobots, biotech, abundant solar energy, AI, and automated fabrication.  I sure hope we get one.  But if we do, it&amp;#x27;s not at all obvious who the returns will flow to.  (Everyone, I hope, not just shareholders.)  Accumulating capital goods, as we&amp;#x27;ve been doing for three million years, is less important when your capital stock can double every 24 hours through self-replication.  Breweries do not account for the quantity of yeast they have on hand as a durable capital asset.&lt;p&gt;And it seems equally plausible that we&amp;#x27;ll instead experience a new Bronze Age Collapse or Decline and Fall, as inexpensive DIY drones, very affordable precision projectiles, anonymous markets in assassination, and ubiquitous retail surveillance provide a decisive advantage for attackers over defenders in the physical world, just as their software counterparts have on the internet.</text></item><item><author>gonzoflip</author><text>May I ask where you got your 3% because that number is very low compared to any number I have ever read? This Wikipedia chart shows annualized returns to be 10.47%. That is &amp;gt;3x your 3%.
&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;en.wikipedia.org&amp;#x2F;wiki&amp;#x2F;S%26P_500_Index#Annual_returns&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;en.wikipedia.org&amp;#x2F;wiki&amp;#x2F;S%26P_500_Index#Annual_returns&lt;/a&gt;</text></item><item><author>kragen</author><text>I think you&amp;#x27;re being a little unfair with the S&amp;amp;P comparison: you should be comparing the returns on your actual investment with the &lt;i&gt;expected&lt;/i&gt; returns on the S&amp;amp;P, not its &lt;i&gt;actual&lt;/i&gt; returns.  The stock market got a 5.4% return over that time, yes, but that&amp;#x27;s above average; we should expect its long-run returns to be close to the rate of economic growth, or more like 3%.  And it could easily have been zero or even negative over a short time like 13 years.&lt;p&gt;By comparison, the risk that your solar panels will stop producing electricity, or that someone will invent Mr. Fusion and drop the price of electricity through the floor in the next decade, is quite low.</text></item><item><author>ChuckMcM</author><text>That is a slightly more nuanced question than you might think.&lt;p&gt;First, I work from a baseline cost of $19K, even though the list price was closer to $40K I didn&amp;#x27;t pay that for the system so I use the actual cost in my calculations.&lt;p&gt;Second there is the point where the money you&amp;#x27;ve saved is equal to the money you paid, we hit that point about 10 years in. And then, depending on the life of your system (which has &amp;quot;positive cashflow&amp;quot; at that point) determines your overall rate of return. The replacment inverter (which is actually going to replace both inverters) is $2K (&amp;quot;upgrade&amp;quot; pricing from the manufacturer) And as the inverter was failing our system was under performing (so not generating as much power). The question will be how much longer am I willing to run the panels. The warranty is 25 years, so in theory another 10 years but the manufacturer (Sharp) no longer makes them and cannot replace them under warranty (they can only offer to repay you to buy a panel from some other vendor with equivalent specs and size).&lt;p&gt;So from a money perspective, had I used the $19K and put it into an S&amp;amp;P 500 ETF in 2003, it would have doubled by now (SPX was 1,008 in 2003, its over 2,016 today). So &amp;quot;bad investment&amp;quot; comparatively. If the panels continue for an additional 8 years and PG&amp;amp;E&amp;#x27;s costs stay about the same then I&amp;#x27;ll have generated about $20K in value from them so that would pencil out to a ARR of about 3.5%. Initially I funded the panels with a refinance of the house loan and that was at 6% but that has since been refinanced even lower. However had it not been, at my original purchase I&amp;#x27;d still be running a deficit trying to both pay back the house and generate cash from the solar.&lt;p&gt;Interestingly for me, with the $7K it would cost to re-implement that system today, and 4% mortgage rates, it would have a rate of return of closer to 14% (10% if you subtract 4% as the cost of capital for a mortgage refi) and pay for itself in a bit more than 3 years and have doubled the return in 6. The challenge is additional regulatory changes which get incorporated into new installations versus the regulation regime I operate under based on my 2003 install date. I wonder sometimes what the trigger is for resetting the project&amp;#x27;s origin date.</text></item><item><author>warmwaffles</author><text>How long until you start seeing a return on investment? Right now my electricity bill for my home is ~100 a month in Texas. I would need to keep the same panels without maintenance fees for 33.33 years by your price point of 40k</text></item><item><author>ChuckMcM</author><text>The aggressiveness of the price drops on solar is pretty amazing. I just lost one of the inverters on my grid-tie system after it had run trouble free for 13 years. So we&amp;#x27;re looking at the first &amp;quot;major&amp;quot; repair to the system I installed in 2003. And in 2003 my 5.2kW of panels on my roof cost $38,000 before subsidies and $19,000 after. 28 panels, two 2.5kW inverters, net about 4.2kW of generation.&lt;p&gt;I priced out replacing all the panels (now I can do in 10 panels what used to take 28) and the inverters with a single 5kW inverter, $7,000. My price, no subsidies. That is over 80% reduction in cost, over 13 years, of the list price of $40K.&lt;p&gt;And that is why it is a huge problem for the power companies, it makes less sense now to &lt;i&gt;not&lt;/i&gt; have panels on your roof.</text></item></parent_chain><comment><author>bjterry</author><text>Returns to the S&amp;amp;P should beat GDP growth even in the long run, steady-state.&lt;p&gt;GDP growth flows to both debt and equity. The debt market is actually much larger than the equity market and since its returns are lower than equities, and they both share GDP as a source of returns in the long run, equities should beat GDP growth in the long run. This argument isn&amp;#x27;t iron clad, but hopefully you can see the general picture.&lt;p&gt;The Gordon growth formula is taught in intro to finance classes to estimate returns to equity. The theory is that stock market returns equal the dividend yield plus growth in stock prices. Stock prices alone are in the long run  expected to grow at the same rate as GDP, but the actual return should be higher by the rate of the dividend yield.&lt;p&gt;These are the most basic arguments against what you&amp;#x27;re saying, but I would also caution against assuming that any particular macroeconomic trend will end, especially that it will end in a timeframe relevant to decisions related to solar panel installations. Sometimes they just keep going. There is no mathematical reason that equity prices can&amp;#x27;t go to infinity, as required rates of return can decrease to zero. If the world becomes more predictable and stable, equities can keep becoming more and more valuable with no damage to finance theory.</text></comment>
<story><title>The price of solar power just fell 50% in 16 months</title><url>http://electrek.co/2016/05/02/price-solar-power-fell-50-16-months-dubai-0299kwh/</url></story><parent_chain><item><author>kragen</author><text>3% is an estimate of the rate of economic growth: &lt;a href=&quot;http:&amp;#x2F;&amp;#x2F;www.tradingeconomics.com&amp;#x2F;united-states&amp;#x2F;gdp-growth&quot; rel=&quot;nofollow&quot;&gt;http:&amp;#x2F;&amp;#x2F;www.tradingeconomics.com&amp;#x2F;united-states&amp;#x2F;gdp-growth&lt;/a&gt; As I said above, we should expect the market&amp;#x27;s long-run returns to be close to the rate of economic growth.&lt;p&gt;It&amp;#x27;s true that stocks in the US in the 20th century dramatically outperformed that 3%.  This is for three reasons: first, up to about 1975, the world&amp;#x27;s economic growth rate was higher than 3%, due to the Second Industrial Revolution; second, up to about 1975, the US&amp;#x27;s economic growth rate was even higher than the world&amp;#x27;s, because it was taking over the markets previously supplied by the bombed-out economies of Europe (especially the UK) and Japan.  Third, since about 1970, the share of economic output that went to owners of capital (rather than labor) increased dramatically.&lt;p&gt;Now, the third of those things probably can&amp;#x27;t happen again, because capital&amp;#x27;s share of output is already super high.  (It&amp;#x27;s not that it can&amp;#x27;t get higher, but it can&amp;#x27;t go past 100%.)  The second could happen again, but if it does, the US will be in the position of the UK, Japan, or Germany — it&amp;#x27;s now the Single Superpower (not even a mere Great Power) who could lose market share, probably to China or to a non-nation-state power.  Investors in Japan&amp;#x27;s and Germany&amp;#x27;s stock markets in 1925 or 1935 didn&amp;#x27;t do so well.&lt;p&gt;The first, well, that&amp;#x27;s anyone&amp;#x27;s guess.  It&amp;#x27;s a total wildcard.&lt;p&gt;It&amp;#x27;s certainly reasonable to posit a Third Industrial Revolution, made out of some of free software, nanobots, biotech, abundant solar energy, AI, and automated fabrication.  I sure hope we get one.  But if we do, it&amp;#x27;s not at all obvious who the returns will flow to.  (Everyone, I hope, not just shareholders.)  Accumulating capital goods, as we&amp;#x27;ve been doing for three million years, is less important when your capital stock can double every 24 hours through self-replication.  Breweries do not account for the quantity of yeast they have on hand as a durable capital asset.&lt;p&gt;And it seems equally plausible that we&amp;#x27;ll instead experience a new Bronze Age Collapse or Decline and Fall, as inexpensive DIY drones, very affordable precision projectiles, anonymous markets in assassination, and ubiquitous retail surveillance provide a decisive advantage for attackers over defenders in the physical world, just as their software counterparts have on the internet.</text></item><item><author>gonzoflip</author><text>May I ask where you got your 3% because that number is very low compared to any number I have ever read? This Wikipedia chart shows annualized returns to be 10.47%. That is &amp;gt;3x your 3%.
&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;en.wikipedia.org&amp;#x2F;wiki&amp;#x2F;S%26P_500_Index#Annual_returns&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;en.wikipedia.org&amp;#x2F;wiki&amp;#x2F;S%26P_500_Index#Annual_returns&lt;/a&gt;</text></item><item><author>kragen</author><text>I think you&amp;#x27;re being a little unfair with the S&amp;amp;P comparison: you should be comparing the returns on your actual investment with the &lt;i&gt;expected&lt;/i&gt; returns on the S&amp;amp;P, not its &lt;i&gt;actual&lt;/i&gt; returns.  The stock market got a 5.4% return over that time, yes, but that&amp;#x27;s above average; we should expect its long-run returns to be close to the rate of economic growth, or more like 3%.  And it could easily have been zero or even negative over a short time like 13 years.&lt;p&gt;By comparison, the risk that your solar panels will stop producing electricity, or that someone will invent Mr. Fusion and drop the price of electricity through the floor in the next decade, is quite low.</text></item><item><author>ChuckMcM</author><text>That is a slightly more nuanced question than you might think.&lt;p&gt;First, I work from a baseline cost of $19K, even though the list price was closer to $40K I didn&amp;#x27;t pay that for the system so I use the actual cost in my calculations.&lt;p&gt;Second there is the point where the money you&amp;#x27;ve saved is equal to the money you paid, we hit that point about 10 years in. And then, depending on the life of your system (which has &amp;quot;positive cashflow&amp;quot; at that point) determines your overall rate of return. The replacment inverter (which is actually going to replace both inverters) is $2K (&amp;quot;upgrade&amp;quot; pricing from the manufacturer) And as the inverter was failing our system was under performing (so not generating as much power). The question will be how much longer am I willing to run the panels. The warranty is 25 years, so in theory another 10 years but the manufacturer (Sharp) no longer makes them and cannot replace them under warranty (they can only offer to repay you to buy a panel from some other vendor with equivalent specs and size).&lt;p&gt;So from a money perspective, had I used the $19K and put it into an S&amp;amp;P 500 ETF in 2003, it would have doubled by now (SPX was 1,008 in 2003, its over 2,016 today). So &amp;quot;bad investment&amp;quot; comparatively. If the panels continue for an additional 8 years and PG&amp;amp;E&amp;#x27;s costs stay about the same then I&amp;#x27;ll have generated about $20K in value from them so that would pencil out to a ARR of about 3.5%. Initially I funded the panels with a refinance of the house loan and that was at 6% but that has since been refinanced even lower. However had it not been, at my original purchase I&amp;#x27;d still be running a deficit trying to both pay back the house and generate cash from the solar.&lt;p&gt;Interestingly for me, with the $7K it would cost to re-implement that system today, and 4% mortgage rates, it would have a rate of return of closer to 14% (10% if you subtract 4% as the cost of capital for a mortgage refi) and pay for itself in a bit more than 3 years and have doubled the return in 6. The challenge is additional regulatory changes which get incorporated into new installations versus the regulation regime I operate under based on my 2003 install date. I wonder sometimes what the trigger is for resetting the project&amp;#x27;s origin date.</text></item><item><author>warmwaffles</author><text>How long until you start seeing a return on investment? Right now my electricity bill for my home is ~100 a month in Texas. I would need to keep the same panels without maintenance fees for 33.33 years by your price point of 40k</text></item><item><author>ChuckMcM</author><text>The aggressiveness of the price drops on solar is pretty amazing. I just lost one of the inverters on my grid-tie system after it had run trouble free for 13 years. So we&amp;#x27;re looking at the first &amp;quot;major&amp;quot; repair to the system I installed in 2003. And in 2003 my 5.2kW of panels on my roof cost $38,000 before subsidies and $19,000 after. 28 panels, two 2.5kW inverters, net about 4.2kW of generation.&lt;p&gt;I priced out replacing all the panels (now I can do in 10 panels what used to take 28) and the inverters with a single 5kW inverter, $7,000. My price, no subsidies. That is over 80% reduction in cost, over 13 years, of the list price of $40K.&lt;p&gt;And that is why it is a huge problem for the power companies, it makes less sense now to &lt;i&gt;not&lt;/i&gt; have panels on your roof.</text></item></parent_chain><comment><author>Will_Do</author><text>There&amp;#x27;s not much reason (and even less empirical evidence[1]) to believe that U.S. stocks should follow U.S. economic growth rates.&lt;p&gt;[1]: &lt;a href=&quot;http:&amp;#x2F;&amp;#x2F;www.economist.com&amp;#x2F;blogs&amp;#x2F;buttonwood&amp;#x2F;2014&amp;#x2F;02&amp;#x2F;growth-and-markets&quot; rel=&quot;nofollow&quot;&gt;http:&amp;#x2F;&amp;#x2F;www.economist.com&amp;#x2F;blogs&amp;#x2F;buttonwood&amp;#x2F;2014&amp;#x2F;02&amp;#x2F;growth-and...&lt;/a&gt;</text></comment>