Installed Cost of Solar Declines

A report just released by the Department of Energy’s Lawrence Berkeley National Laboratory (Berkeley Lab) indicates that the installed cost of solar photovoltaic (PV) power systems in the United States fell throughout 2010 and continues to fall in the first half of 2011.

According to Berkeley Labs, the average installed cost of residential and commercial PV systems completed in 2010 fell by roughly 17 percent from the year before, and by an additional 11 percent within the first six months of 2011. The report indicates that this reduction in the cost of installed solar is due to two core reasons: (a) a reduction in price of PV modules and (b) decrease in non-module costs.

By now, because of Solyndra, many people know that there is currently a large over-supply of PV modules in the market, which, according to Berkeley Labs, has dramatically lowered the price of these modules. And now those price decreases are finally making there way to the consumer. According to Galen Barbose of Berkeley Lab’s Environmental Energy Technologies Division and co-author of the report: “Wholesale PV module prices have fallen precipitously since about 2008, and those upstream cost reductions have made their way through to consumers.”

The second cause of reduction in the installed cost of solar is that non-module costs – such as installation labor, marketing, overhead, and inverters – has declined by roughly 18 percent from 2009 to 2010.  “The drop in non-module costs is especially important,” notes report co-author and Berkeley Lab scientist Ryan Wiser, “as those are the costs that can be most readily influenced by solar policies aimed at accelerating deployment and removing market barriers, as opposed to research and development programs that are also aimed at reducing module costs.”

The report did note one downside for the solar consumers. The average size of direct cash incentives provided through state and utility PV incentive programs has declined steadily since their peak in 2002. So while pre-incentive installed costs fell by $1.00/W and $1.50/W for residential and commercial PV in 2010, respectively, the decline in net installed costs (or those costs after incentives) fell by only $0.40/W for residential PV and by $0.80/W for commercial PV.

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