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US report shows continued drop of cost for installed solar PV systems

The average cost to install solar PV systems in the US has dropped by more than 30% from 1998 to 2008, with a four percent drop within the last year.

The most recent decline in costs is primarily the result of a decrease in solar PV module costs, explains ‘Tracking the Sun II: The Installed Cost of Photovoltaics in the US from 1998-2008.’ The report was prepared at Lawrence Berkeley National Laboratory, one of the national labs operated by the US Department of Energy (DoE).

By contrast, cost reductions from 1998 through 2007 were due largely to a decline in non-module costs, such as labour, marketing, overhead, inverters and balance of system components. The study examines 52,000 grid-connected solar PV systems that were installed in 16 states between 1998 and 2008, and found that average installed costs (in real 2008 dollars) declined from US$10.80/W in 1998 to US$7.50/W in 2008, equivalent to an average annual reduction of US$0.30/W or 3.6% per year in real dollars.

Long-term reductions in installed cost are most evident for solar PV systems over 100 kW in size, with systems over 5 kW exhibiting the largest absolute reduction, from US$12.30/W in 1998 to US$8.50/W in 2008. Installed costs for solar PV exhibit significant economies of scale, with systems >2 kW completed in 2008 averaging US$9.20/W, while 500 to 750 kW systems averaged US$6.50/W.

“International experience suggests that greater near-term cost reductions may be possible in the US, as the average cost of small residential PV installations in 2008 (excluding sales/value-added tax) in both Japan (US$6.9/W) and Germany (US$6.1/W) was significantly below that in the US ($7.9/W),” it notes.

Average installed costs vary widely across states; ranging from a low of US$7.30 for >10 kW solar PV systems in Arizona (followed by California, at US$8.20) to a high of US$9.90 in Pennsylvania and Ohio. “This variation in average installed cost across states, as well as comparisons with Japan and Germany, suggest that markets with large PV deployment programs tend to have lower average installed costs for residential PV, though exceptions exist.”

Average installed costs for residential solar PV systems was lower than for similarly-sized commercial systems, with average costs for homes lower by US$0.60/W for systems within the 5-10 kW range and by US$0.30 within the 10-100 kW range. The new construction market offers cost advantages for residential solar PV; among 1-3 kW home systems funded through California programmes, where residential new construction cost US$0.80/W less than comparably-sized residential retrofit systems.

Among solar PV systems installed in new homes last year, building-integrated solar PV (BIPV) systems cost US$0.90 more per watt on average, than rack-mounted systems (US$8.30 vs. US$7.40). Although there were relatively few thin-film systems within the 52,000 solar PV systems examined, solar systems with thin-film modules had lower average installed costs than crystalline systems (US$1.50 less per watt among 10-100 kW systems and US$0.60 less among >100 kW systems).

Among 10-100 kW solar PV systems installed last year, systems with tracking had average installed costs that were US$0.50/W (or 6%) higher than fixed-axis systems.

“The historical trend towards declining installed costs, along with the narrowing of cost distributions, suggests that 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 PV delivery infrastructure,” the report concludes.

“Moreover, the fact that states with the largest PV markets also appear to have somewhat lower average costs than most states with smaller markets lends some credence to the premise that state and utility PV deployment policies can affect local costs.

“Yet, even lower average installed costs in Japan and Germany suggest that deeper near-term cost reductions may be possible,” it adds.

“Indeed, further cost reductions will be necessary if the PV industry is to continue its expansion in the customer-sited market, given the desire of PV incentive programs to ratchet down the level of financial support offered to PV installations.”

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