Solar photovoltaic costs have fallen by a factor of more than 10,000 since the first commercial cells were placed on a Navy satellite in the 1950s. Greg Nemet, Professor at the University of Wisconsin-Madison La Follette School of Public Affairs and author of How Solar Energy Became Cheap, joined the VECKTA podcast to explain how that happened and what it now means for companies making practical decisions about onsite energy. The central question for most business leaders today is not whether solar and storage work. It is where these systems fit inside a business that also has to manage rising utility rates, grid reliability risk, and increasing electrical load.
How Solar Actually Got Cheap
Greg describes the cost decline as a relay race. The US created the technology. Germany built a market through early deployment policy. China made it cheap through scale and manufacturing. Each country contributed a distinct capability, and the product, capital, and ideas kept moving across borders. One example he uses is a Chinese solar company in the mid-2000s that raised $300 million from US teachers’ pension funds, used the capital to purchase equipment from Applied Materials in the US and manufacturers in Austria, Switzerland, and Germany, built panels in Wuxi, and sold them into Germany, Spain, and California. That is what made solar cheap. It was not a single breakthrough.
Batteries Are Following the Same Curve, Only Faster
Greg has tracked more than 200 technologies through their cost curves. Batteries sit near the top. They are following a similar learning curve to solar, only faster, and they are becoming concentrated in the same way, with China dominating manufacturing. The cost decline is incremental but relentless, and it now makes solar plus storage a much stronger business proposition than solar alone. The combination also opens up new uses for onsite energy, including peak shaving, demand response, backup power during outages, and vehicle integration.
Why the Commercial and Industrial Segment Is a Sweet Spot
The most interesting part of the conversation for the VECKTA audience is when Greg places the commercial and industrial segment on the cost curve. The cheapest installed solar is a utility-scale project in a desert. The most expensive is a tall single-family home. Commercial and industrial sits much closer to utility-scale costs than to residential costs, while competing against retail electricity prices rather than wholesale. The result is strong project economics, and most commercial roofs in the US are still empty beyond their HVAC equipment. Greg’s point is blunt. There is enormous unused real estate on top of the buildings where business is already happening.
Soft Costs Are Now the Hardware
Roughly a quarter of a typical project cost is now the hardware. The remaining three quarters is soft cost, including installation labor, permitting, customer acquisition, and developer margin. Greg points to Australia, where about a third of homes have solar, often with one-day installations and streamlined permitting, at roughly a third of US install costs. The competitive pressure to compress US soft costs is one of the biggest levers available to the industry, and it is a core reason VECKTA exists. Reducing soft costs is how projects stay viable as the investment tax credit changes and how business buyers capture more of the value.
Tax Credits, Utility Rates, and What Actually Matters
The end of the investment tax credit is not the end of the industry. Greg’s historical evidence is clear. When tax credits expire quickly, there is a rush to use them, then a lull, then a return to growth. What matters more over the next five years is the direction of utility rates. US electricity prices have risen roughly 40 percent in the last five years, and the drivers of the next five, including data center load, geopolitics, and aging infrastructure, all point in the same direction. The compounding effect of those rates is a larger number than the tax credit for most commercial buyers.
A Practical Next Step
Greg advice to business leaders is simple. Look at your energy bill. Compare it to what you were paying five years ago. Estimate where it will be five years from now. Talk to peers who have installed solar, batteries, or a microgrid and ask what actually changed. Onsite energy is an asset, not a sustainability line item. It influences operating cost, resilience, and property value. The commercial sweet spot Greg describes is where VECKTA works every day, and it is a good place to start if energy is one of the many things on your plate.
