The average cost of solar photovoltaic systems declined significantly from 1998 to 2007, primarily due to reductions in non-module costs, according to a new study.
Researchers at 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 due mostly to decreases in costs of labor, marketing, overhead, inverters, and balance of systems.
Thus, its reasonable to expect that even greater cost reductions lie ahead as economies of scale develop for module components.
The study 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/Watt in 1998 to $7.60/W in 2007, equivalent to an average annual
reduction of $0.30/W, or 3.5% per year in real dollars.
The report 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.
Costs Differ by Region and Type of System
The cost reduction over time was largest for smaller PV systems, such as those used to power individual households. Also, installed costs show significant economies of scale. Systems completed in 2006 or 2007 that were less than 2 kW in size averaged $9.00/Watt, while systems larger than 750 kW averaged $6.80/W.
Installed costs were also found to vary widely across states. Among systems completed in 2006 or 2007 and less than 10 kW, average costs range from a low of $7.60/Watt in Arizona, followed by California and New Jersey, which had average installed costs of $8.10/W and $8.40/W, respectively, to a high of $10.60/W 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. Among small residential PV systems in California completed in 2006 or 2007, those systems installed in residential new construction cost $0.60/W less than comparably-sized systems installed in retrofit applications.
Cash Incentives Declined
The study also found that direct 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 investment tax credits (ITCs). As a result of the increase in the federal ITC for commercial systems in 2006, total after-tax incentives for commercial PV were $3.90/W in 2007, a near-record high based on the data analyzed in the report. Total after-tax incentives for residential systems, on the other hand, averaged $3.1/W in 2007, their lowest level since 2001.
Because incentives for residential PV systems declined over this period, the net installed cost of residential PV has remained relatively flat since 2001. At the same time, the net installed cost of commercial PV has dropped—it was $3.90/W in 2007, compared to $5.90/W in 2001, a reduction of 32%, thanks in large part to the federal ITC.
The report “Tracking the Sun: The Installed Cost of Photovoltaics in the U.S. from 1998–2007,” by Ryan Wiser, Galen Barbose, and Carla Peterman, can be downloaded at the link below.
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