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Average Installed Solar PV Cost Declines 31%

The average installed cost of solar photovoltaic (PV) systems has decreased 31% from US$10.8/W in 1998 to US$7.5/W in 2009, the Lawrence Berkeley National Laboratory say.

Despite a decline is wholesale solar module prices from 2008 to 2009, the average installed costs remained flat over this period, but preliminary data for 2010 suggests that there was a significant cost decline in 2010, according to Berkeley Lab’s Tracking the Sun III: The Installed Cost of Photovoltaics in the United States from 1998-2009.

“A goal of government incentive programs and other policy support mechanisms is to stimulate demand for PV, and thereby drive down the cost of PV systems. One purpose of this study is to provide reliable information about the historical costs of installed systems in the United States,” says report co-author Ryan Wiser of Berkeley Lab’s Environmental Energy Technologies Division.

Co-author Galen Barbose adds: “Based on our data, average installed costs held steady at US$7.5/W from 2008 to 2009, even though wholesale module prices dropped substantially over this period. However, that drop in module prices appears to have made its way to customers in 2010.”

Modules usually represent about half the installed cost of a solar PV system.

California and New Jersey Lead

Under the California Solar Initiative Program, average installed costs dropped by US$1/W between 2009 and the first 10 months of 2010. In New Jersey costs dropped by US$1.20/W between 2009 and the first 6 months of 2010.

“This reduction in installed costs marks an important departure from the trend of the preceding four years, during which costs seen by customer-owners of PV systems remained relatively flat as rapidly expanding US and global PV markets put upward pressure on both module prices and non-module costs.

“This dynamic has now shifted, as expanded manufacturing capacity in the solar industry, in combination with the global financial crisis, led to a decline in wholesale module prices,” says Naïm Darghouth, also co-author of the report.

Declining Non-Module Costs

Non-module costs are also decreasing, such as the cost of labor, marketing, overhead, inverters and the balance of systems, Berkeley Lab says.

Average non-module costs in the US declined by US$1.40/W from 1998 to 2009, while solar module costs declined by US$2.50/W over the period from 1998 to 2007.

Economies of Scale

Berkeley Lab’s study into solar PV costs also reveals a significant economies of scale. Solar PV systems less than 2 KW in size completed in 2009 averaged US$9.90/W, while solar PV systems over 1 MW averaged US$7.00/W.

Costs also vary across states. For solar PV systems under 10 KW, average costs ranged from a low of US$7.10/W in Texas to a high of US$9.60/W in Minnesota.

Considering this and data from the German and Japanese solar PV markets, the report suggests that solar PV costs can be driven lower through large-scale deployment programs, but that other issues also play an important role.

New construction markets, for example, appear to offer cost advantages for residential solar PV systems. Of small residential solar PV systems completed in California in 2009, those installed on new homes cost US£1.60/W less than comparable systems in retrofit rooftop applications.

Declining Incentives

Looking at cash incentives, Berkeley Lab finds that the average size of direct cash incentives provided by state and local solar PV incentive programs declined between 1998 and 2009. However, other incentives, such as Federal investment tax credits (ITCs) and the Treasury Grant Program have become increasingly important.

For commercial solar PV systems, the average combined after-tax value of Federal and state ITCs, plus direct cash incentives provided by state and local incentive programs, was US$3.90/W in 2009, down slightly from the peak in 2006, but still on a record-high.

Total after-tax incentives for residential systems rose by more than a third to US$3.90/W in 2009 due to the elimination of the US$2000 cap on the Federal ITC for residential systems that had previously been in place.

The increase in total after-tax incentives for residential solar PV from 2008 and 2009 led to a noticeable decrease in net installed costs.

On average, the net installed cost for residential solar PV was US$4.10/W in 2009, down around 24% from 2008 levels. In contrast, average net installed costs for commercial solar PV remained more or less unchanged from 2008 to 2009 at around US$4.00/W.

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