Solar Costs Decrease But So Do Incentives

The installed price of solar photovoltaic (PV) power systems in the U.S. fell substantially in 2011 and through the first half of 2012, according to “Tracking the Sun V: An Historical Summary of the Installed Price of Photovoltaics in the United States from 1998 to 2011,” an annual PV cost-tracking report produced by the U.S. Department of Energy’s Lawrence Berkeley National Laboratory, Berkeley, Calif.

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. 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 declined by roughly 30 percent from 1998 to 2011. “The drop in nonmodule costs is especially important,” notes report Co-author Ryan Wiser of Berkeley Lab’s Environmental Energy Technologies Division. “These costs can be most readily influenced by local, state and national policies aimed at accelerating deployment and removing market barriers.” Non-module costs now represent a sizable fraction of the installed price of PV systems, and continued deep reduction in the price of PV will require concerted emphasis on lowering the portion of non-module costs associated with so-called “business process” or “soft” costs.

State agencies and utilities in many regions offer rebates or other forms of cash incentives for residential and commercial PV systems. According to the report, the median pre-tax value of such cash incentives ranged from 90 cents to $1.20 per watt for systems installed in 2011, depending on system size. These incentives have declined significantly over time, falling by roughly 80 percent during the past decade and by 21 to 43 percent from 2010-11. Rather than a direct cash incentive, some states with renewables portfolio standards provide financial incentives for 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.

Download the full report. In addition, a high-level overview of historical, recent and projected near-term PV pricing trends in the U.S. is available for download.

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