SUN COSTS FALL

New Berkeley Lab Report Shows Significant Historical Reductions in the Installed Costs of Solar Photovoltaic Systems in the World
Alan Chen, February 19, 2009 (News Center/Lawrence Berkeley National Laboratory)

"A new study on the installed costs of solar photovoltaic (PV) power systems in the U.S. shows that the average cost of these systems declined significantly from 1998 to 2007, but remained relatively flat during the last two years of this period.

"[Ryan Wiser, Galen Barbose, and Carla Peterman] at [the Environmental Energy Technologies Division of the] Department of Energy’s Lawrence Berkeley National Laboratory (Berkeley Lab) who conducted the study say that the overall decline in the installed cost of solar PV systems is mostly the result of decreases in nonmodule costs, such as the cost of labor, marketing, overhead, inverters, and the balance of systems…"

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"[Tracking the Sun: The Installed Cost of Photovoltaics in the U.S. from 1998–2007] examined 37,000 grid-connected PV systems installed between 1998 and 2007 in 12 states. It found that average installed costs, in terms of real 2007 dollars per installed watt, declined from $10.50 per watt in 1998 to $7.60 per watt in 2007, equivalent to an average annual reduction of 30 cents per watt or 3.5 percent per year in real dollars.

"…According to the report, this trend, along with a reduction in the number of higher-cost “outlier” installations, suggests that state and local PV-deployment policies have achieved some success in fostering competition within the industry and in spurring improvements in the cost structure and efficiency of the delivery infrastructure for solar power…"

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"Other information about differences in costs by region and by installation type emerged from the study. The cost reduction over time was largest for smaller PV systems…Also, installed costs show significant economies of scale…Installed costs were also found to vary widely across states…

"…[A]verage costs range from a low of $7.60 per watt in Arizona, followed by California and New Jersey, which had average installed costs of $8.10 per watt and $8.40 per watt respectively, to a high of $10.60 per watt in Maryland. Based on these data, and on installed-cost data from the sizable Japanese and German PV markets, the authors suggest that PV costs can be driven lower through sizable deployment programs. The study also found that the new construction market offers cost advantages for residential PV systems…"

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"…[D]irect cash incentives provided by state and local PV incentive programs declined over the 1998-2007 study period. Other sources of incentives, however, have become more significant, including federal incentive tax credits (ITCs). As a result…total after-tax incentives for commercial PV were $3.90 per watt in 2007, an all-time high…Total after-tax incentives for residential systems, on the other hand, averaged $3.1 per watt in 2007, their lowest level since 2001.

"Because incentives for residential PV systems declined…the net installed cost of residential PV has remained relatively flat…At the same time, the net installed cost of commercial PV has dropped…32 percent, thanks in large part to the federal ITC…"