US Solar Costs Continue Rapid Decline, But So Do Incentives

We all know that prices for solar PV have been falling rapidly, and a report from Lawrence Berkeley Lab gives us details on this picture.

Over the past year, the installed cost of US solar PV systems fell an impressive 11%-14%, and another 3-7% in the first half of 2012.

In 1998, installed PV prices averaged $12 per watt. Since then they have been falling 5-7% a year, with particularly sharp reductions since 2009.

"This report shows just how far solar power has come in the U.S., and how much more we can do. Faced with a recession economy, messy election politics and an entrenched electricity marketplace, solar is quietly defying the odds and reinventing our national energy landscape. It’s really remarkable," says Adam Browning, Executive Director of the Vote Solar Initiative.

The average installed price for a solar PV system is down to $6.10 per watt (W) for residential and small commercial installations under 10 kilowatts (kW); $4.90/W for commercial deployments larger than 100 kW; and $3.40/W for utility-scale PV systems larger than 2,000 kW.

As you might expect, the reductions are mainly due to steep cuts in module prices that have wreaked havoc on balance sheets of solar module manufacturers. Panel prices dropped $2.10/W from 2008-2011, and even more this year.

This downward sweep of module prices has been a boon for solar installers, but not as much as you’d expect. At the same time, solar incentives are disappearing, falling roughly 80% over the past decade.

The value of incentives slipped 21%-43% between 2010-2011 alone, depending on the state, and in 2011, average pre-tax value ranged from $0.90/W to $1.20/W, depending on system size.

Rather than offering cash incentives, some states with Renewable Portfolio Standards (RPS) create markets for solar renewable energy certificates (SRECs). But SREC prices have fallen dramatically, which has discouraged investors.

New Jersey is one of those states and recently passed legislation to prop up SREC prices.

Soft costs of solar such as installation labor, marketing and inverters have also fallen significantly – about 30% in the last three years.

"The drop in non-module costs is especially important, as these costs can be most readily influenced by local, state, and national policies aimed at accelerating deployment and removing market barriers," says Ryan Wiser, co-author of the report.

Retrofits continue to cost more than installations of similarly sized solar PV on new homes.

Reducing the soft costs of solar installation is the aim of the DOE’s SunShot Initiative, which is spearheading a $10 million competition over the next three years to surface best practices that can be repeated around the US.

To produce the report, the authors analyzed more than 150,000 residential, commercial, and utility-sector PV systems installed between 1998-2011 across 27 states, representing roughly 76% of all grid-connected PV capacity installed in the US.

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