The installed prices for solar photovoltaic (PV) power systems fell by a range of 6 to 14 percent, or $0.30 per watt to $0.90 per watt, from 2011 to 2012 according to the sixth edition of “Tracking the Sun,” an annual PV cost-tracking report published this week by the Department of Energy’s Lawrence Berkeley National Laboratory.
The report looked at a 208,529-unit sample of residential and commercial solar installations that “represents 72% of all cumulative grid-connected PV capacity installed in the United States through 2012.” The researchers looked at the median installed price of solar panels in three system size groupings. In 2012, this median installed price ranged from $5.3 per watt for small systems, down to $4.6 per watt for systems larger than 100 kilowatts:
Since 1998, installed system prices have been falling thanks to reductions in the costs of solar energy that do not include the panels themselves: inverters, mounting hardware, labor, permitting and fees, customer acquisition, overhead, taxes, and installer profit. Prices have been falling in the short-term because of the decline of the cost of solar panels, which fell by $2.6/W from 2008 through 2012. This represents an 80 percent price drop for PV systems generating less than 10 kW.
The steady drop in costs have helped to enable a steep increase in the pace of installation over the last several years. This graph shows shows the growth of total installed solar capacity since 1998 (along with the sample). Look at the jump from 2009 to 2012:
However, module prices are established based on supply and demand. “There simply are limits to how much further module prices can fall, and so it stands to reason that continued reductions in PV system prices will need to come primarily from the soft cost side,” co-author Ryan Wiser explained.
The soft costs, or non-hardware prices, can be influenced by local, state, and national policies. Countries like Italy, Australia, and Germany have generally incentivized solar adoption through long-term policies, which have in turn helped to reduce soft costs. In fact, residential PV systems installed last year in Italy, Australia, and Germany are nearly 40 percent lower than in the U.S. The report directly cites the pricing of soft costs for this glaring difference. These costs represent approximately half of the total installed cost of residential solar systems, so having the right policies in place at all levels of government remains the greatest opportunity for cost reductions, which Climate Progress discussed last month.
Even so, the U.S. achieved many significant accomplishments last year, installing a record 3,313 megawatts of PV in 2012. Additionally, the market size for the U.S. industry grew from $8.6 billion in 2011 to $11.5 billion in 2012, according to GTM Research. And in California, PV system prices have decreased by an additional 10 to 15 percent just within the first six months of 2013 — leading the report authors to suggest that PV price reductions in 2013 are on pace to match or exceed recent years. In order to continue the downward price trend over the long term, the U.S. solar market will have to focus on reducing soft costs.