Cost of Solar Declines, But So Do Incentives

The installed price of solar photovoltaic power systems in the United States fell substantially in 2011 and through the first half of 2012, due largely to a steep decline in the cost of solar modules, according to the latest edition of “Tracking the Sun,” an annual PV cost-tracking report produced by the Department of Energy’s Lawrence Berkeley National Laboratory.

However, the installed price reductions were offset by declines in incentives.

The median installed price of residential and commercial PV systems completed in 2011 fell by roughly 11 to 14 percent from the year before, depending on system size, and, in California, prices fell by an additional 3 to 7 percent within the first six months of 2012. These recent installed price reductions are attributable, in large part, to dramatic reductions in PV module prices, which have been falling precipitously since 2008.

The report indicates that non-module costs – such as installation labor, marketing, overhead, inverters, and the balance of systems – have also fallen significantly over time. The drop in non-module costs is important because these costs can be most readily influenced by government policies aimed at advancing solar.

Average non-module costs for residential and commercial systems declined by roughly 30 percent from 1998 to 2011, but have not declined as rapidly as module prices in recent years. As a result, non-module costs now represent a sizable fraction of the installed price of PV systems.

The report indicates that the median installed price of PV systems installed in 2011 was $6.10/W for residential and small commercial systems smaller than 10 kW in size and was $4.90/W for larger commercial systems of 100 kW or more in size. Utility-sector PV systems larger than 2,000 kW in size averaged $3.40/W in 2011. PV systems being sold today are being offered at even lower prices.

However, price declines for PV systems have been offset by falling incentives. According to the report, the median pre-tax value of such cash incentives ranged from $0.90/W to $1.20/W for systems installed in 2011, depending on system size. These incentives have declined significantly over time, falling by roughly 80 percent over the past decade, and by 21 percent to 43 percent from just 2010 to 2011. Rather than a direct cash incentive, some states with renewables portfolio standards provide financial incentives for solar PV by creating a market for solar renewable energy certificates (SRECs), and SREC prices have also fallen dramatically in recent years. These declines in cash incentives and SREC prices have, to a significant degree, offset recent installed price reductions, dampening any overall improvement in the customer economics of solar PV.

This fifth edition in Berkeley Lab’s “Tracking the Sun” report series describes historical trends in the installed price of PV in the United States, and examines more than 150,000 residential, commercial, and utility-sector PV systems installed between 1998 and 2011 across 27 states, representing roughly 76 percent of all grid-connected PV capacity installed in the United States.

One thought on “Cost of Solar Declines, But So Do Incentives

  1. Good post. The cost of solar power(PV) has to come down further to enable developing countries to have affordability of Solar Power. Another drawback is low efficiency of present solar cell. With many institutions involved in increasing the efficiency of solar cells and improved materials like Gallium Arsenide,Gallium Phosphide,Tandem,Organic Ploymer it is expected the Efficiency of the solar cell will go up considerably in the near future to enable the cost to come down and more affordability in developing countries.
    Dr.A.Jagadeesh Nellore(AP),India

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