Solar PV Costs Falling, But Still Have a Ways to Go, Study Finds
March 29, 2009
California Energy Markets
Costs for solar photovoltaic systems have dropped overall through
the past decade and state and utility incentive programs may have helped with the decline, according to a report this month from
Lawrence Berkeley National Laboratory.
Government incentives drive the PV market in the United States,
and PV's popular appeal drives the incentives, noted the report,
titled "Tracking the Sun."
The drop came mostly in non-module costs such as inverters,
mounting hardware, labor, permitting and fees, and shipping and
overhead.
Government programs can impact non-module costs more than module costs, and a
decline can help show the success of those programs, the report noted.
Average installed costs (before incentives) fell from about
$10.50/watt in 1998 to $7.60/watt in 2007, which shows that state and
local PV deployment programs have helped cut costs, the report stated.
Systems less than 5 kW in size showed the largest cost declines, from $11.80/
watt in 1998 to $8.30/watt in 2007. Yet module costs fell only about 80
cents/watt from 1998 to 2007.
"State programs have had an effect over this timeframe" and it
will likely continue, said researcher Ryan Wiser, one of the report
authors.
While smaller systems showed the larger cost reductions, fewer
large-scale systems have existed for as many years in order to study
them, Wiser noted. Plus, non-module costs make up a heftier part of
the expense of small installations than they do for big projects. But
recent larger projects, such as a 12.6 MW installation in Nevada and
Southern California Edison's 250 MW rooftop PV program, already show
costs falling to around $4/watt, he added.
The report also found that costs from 2005 to 2007 remained about
flat at around $7.60/watt. The paper attributed that finding to
constraints in the supply chain and delivery infrastructure as PV
markets quickly expanded.
But recent developments-including expectations for over-supply of PV
modules and a recent lift of a $2,000 cap on the federal investment
tax credit for solar PV-could help. The focus on the commercial sector
over the past couple of years, with its economies of scale and cheaper
installation compared to many smaller systems, could shift to the
residential sector, Wiser said.
The study aimed to help track the installed cost of PV systems by
characteristics, location and component. It looked at the installed
cost of PV in the U.S. from 1998 to 2007, reviewing nearly 37,000 home
and commercial PV systems that totaled about 363 MW of capacity and
made up about 76 percent of all grid-connected PV capacity installed
in the U.S.
The report also found that state and utility cash incentives have
declined since 2002-by about $1.90/watt for systems under 100 kW and
by about $1.40/watt for systems between 100 kW and 500 kW. Factoring
in tax credits, financial incentives rose for commercial PV from 2002
to 2007, but fell for home PV-helping to explain a shift toward more
commercial systems during that stretch. In 2006, the federal
investment tax credit for commercial systems rose from 10 percent to
30 percent of project costs, while a $2,000 cap started for home PV
systems. That cap lifted this year, and the residential sector may see
more activity, the report added.
Average installed costs in the U.S. still top those in Japan and
Germany, where prices hit about $5.90/watt and $6.60/watt,
respectively, the report noted.
Prices also vary by state and depend partly on PV market maturity
and size. The two largest PV markets in the U.S., California and New
Jersey, boast among the lowest costs-$8.10/watt and $8.40/watt,
respectively, for systems under 10 kW. Arizona saw the lowest costs
with $7.60/watt, while Maryland's came in at $10.60/watt. Furthermore,
according to data from the California Emerging Renewables Program,
systems installed through new home construction rate more than 80
cents/watt less than retrofitted systems.
But the findings show that the installation costs, not the cost of
solar cells, have fallen, noted Steven Weissman, associate director
for energy law and policy at the Center for Law, Energy & the
Environment at UC Berkeley's Boalt Hall School of Law, in a blog
posting on the center's website. Manufacturing costs also need to fall
to make PV cost- competitive, since installation costs will never hit
zero, Weissman noted. And a 1980 Office of Technology Assessment goal
had aimed to cut installed costs to $1/watt by 1988-a target that
remains far off, he added [Hilary Corrigan].
California Energy Markets
Costs for solar photovoltaic systems have dropped overall through
the past decade and state and utility incentive programs may have helped with the decline, according to a report this month from
Lawrence Berkeley National Laboratory.
Government incentives drive the PV market in the United States,
and PV's popular appeal drives the incentives, noted the report,
titled "Tracking the Sun."
The drop came mostly in non-module costs such as inverters,
mounting hardware, labor, permitting and fees, and shipping and
overhead.
Government programs can impact non-module costs more than module costs, and a
decline can help show the success of those programs, the report noted.
Average installed costs (before incentives) fell from about
$10.50/watt in 1998 to $7.60/watt in 2007, which shows that state and
local PV deployment programs have helped cut costs, the report stated.
Systems less than 5 kW in size showed the largest cost declines, from $11.80/
watt in 1998 to $8.30/watt in 2007. Yet module costs fell only about 80
cents/watt from 1998 to 2007.
"State programs have had an effect over this timeframe" and it
will likely continue, said researcher Ryan Wiser, one of the report
authors.
While smaller systems showed the larger cost reductions, fewer
large-scale systems have existed for as many years in order to study
them, Wiser noted. Plus, non-module costs make up a heftier part of
the expense of small installations than they do for big projects. But
recent larger projects, such as a 12.6 MW installation in Nevada and
Southern California Edison's 250 MW rooftop PV program, already show
costs falling to around $4/watt, he added.
The report also found that costs from 2005 to 2007 remained about
flat at around $7.60/watt. The paper attributed that finding to
constraints in the supply chain and delivery infrastructure as PV
markets quickly expanded.
But recent developments-including expectations for over-supply of PV
modules and a recent lift of a $2,000 cap on the federal investment
tax credit for solar PV-could help. The focus on the commercial sector
over the past couple of years, with its economies of scale and cheaper
installation compared to many smaller systems, could shift to the
residential sector, Wiser said.
The study aimed to help track the installed cost of PV systems by
characteristics, location and component. It looked at the installed
cost of PV in the U.S. from 1998 to 2007, reviewing nearly 37,000 home
and commercial PV systems that totaled about 363 MW of capacity and
made up about 76 percent of all grid-connected PV capacity installed
in the U.S.
The report also found that state and utility cash incentives have
declined since 2002-by about $1.90/watt for systems under 100 kW and
by about $1.40/watt for systems between 100 kW and 500 kW. Factoring
in tax credits, financial incentives rose for commercial PV from 2002
to 2007, but fell for home PV-helping to explain a shift toward more
commercial systems during that stretch. In 2006, the federal
investment tax credit for commercial systems rose from 10 percent to
30 percent of project costs, while a $2,000 cap started for home PV
systems. That cap lifted this year, and the residential sector may see
more activity, the report added.
Average installed costs in the U.S. still top those in Japan and
Germany, where prices hit about $5.90/watt and $6.60/watt,
respectively, the report noted.
Prices also vary by state and depend partly on PV market maturity
and size. The two largest PV markets in the U.S., California and New
Jersey, boast among the lowest costs-$8.10/watt and $8.40/watt,
respectively, for systems under 10 kW. Arizona saw the lowest costs
with $7.60/watt, while Maryland's came in at $10.60/watt. Furthermore,
according to data from the California Emerging Renewables Program,
systems installed through new home construction rate more than 80
cents/watt less than retrofitted systems.
But the findings show that the installation costs, not the cost of
solar cells, have fallen, noted Steven Weissman, associate director
for energy law and policy at the Center for Law, Energy & the
Environment at UC Berkeley's Boalt Hall School of Law, in a blog
posting on the center's website. Manufacturing costs also need to fall
to make PV cost- competitive, since installation costs will never hit
zero, Weissman noted. And a 1980 Office of Technology Assessment goal
had aimed to cut installed costs to $1/watt by 1988-a target that
remains far off, he added [Hilary Corrigan].