Published on August 13th, 2015 | by Silvio Marcacci5
US Solar PV Cost Fell Over 50% In 5 Years: Government Report
August 13th, 2015 by Silvio Marcacci
Attention, all American businesses and homeowners interested in adding solar to your property: Here’s a half-off coupon, courtesy of the US solar industry.
Well, not exactly – but the average price of adding solar to a home or business has dropped by more than 50% over the past years, according to Lawrence Berkeley National Laboratory’s (LBNL) eighth-annual Tracking the Sun report.
While the report underscores just how quickly solar prices are falling across America, largely due to industry efforts to reduce solar soft costs (non-module project costs) as government incentives taper off, it also hints at the potential for solar to survive a federal Investment Tax Credit expiration while reaching low-income communities.
Tracking Solar PV Cost For 81% Of US Capacity
Tracking the Sun is an output of the US Department of Energy’s SunShot Initiative, which aims to reduce the cost of solar photovoltaic (PV) power 75% from 2010 to 2020. Over the past 8 years, the report has tracked the downward trend of installed prices for projects starting in 1998 and continuing through the present day.
Installed price trends are based on individual project data collected from 400,000 residential and commercial solar PV projects – roughly 81% of all PV capacity installed across America through 2014 and 62% of 2014 capacity additions.
The data was sourced from state agencies and utilities administering incentive programs, solar renewable energy credit (SREC) systems, or solar interconnection processes across 42 states. LNBL notes the sample is heavily weighted toward six major solar states – California, North Carolina, Massachusetts, New Jersey, New York, and Arizona.
Prices Keep Falling Through 2015 As Soft Costs Drop
Several interesting trends emerge from Tracking the Sun, but solar’s downward price trend is the largest one. National median installed prices in 2014 fell $0.4 per watt for residential and non-residential systems below 500 kilowatts (kW) in size (a 9% and 10% decline, respectively), and $0.7/watt for non-residential systems over 500 kW in size (a whopping 21%).
This trend has so far continued through 2015. Median installed prices over the first half of this year fell $0.3/watt (8%) for residential systems, $0.5/watt for non-residential systems below 500 kW (13%), and $0.2/watt for non-residential systems over 500 kW in size (6%).
Interestingly, these recent cost declines have happened while module prices have held steady, a significant departure from 2008–2012, when price reductions were due to a “steep drop in global prices for PV modules.” In fact, LBNL attributes almost most of the 2013-2014 residential solar price decline to industry efforts to reduce soft costs — the largest portion of solar installation prices.
Recent non-module cost declines can be partly attributed to reductions in inverter and racking equipment costs, but are primarily associated with reductions in PV soft costs, which include such items as marketing and customer acquisition, system design, installation labor, permitting and inspection costs, and installer margins. Soft cost reductions are partly due to steady increases in system size and module efficiency, though likely also reflect a broad and sustained emphasis within the industry and among policymakers on addressing soft costs.
But perhaps most significant for an industry seeking every cost efficiency ahead of the expected federal ITC expiration in 2016, installed price declines have largely matched falling state and utility incentives – meaning the industry has seen incentives fall and become more efficient as a result.
Indeed, LBNL notes reduced cash incentives over the long term for solar projects have fallen from $5-$7/watt at peak to less than $1/watt in most major markets. This reduction equals roughly 70%–120% of the corresponding drop in installed prices, in a move LBNL cites as “a deliberate strategy by program administrators to provide a long-term signal to the industry to reduce costs, and is likely among the many drivers for recent declines in solar soft costs.”
Wide Price Spreads Among Installations & Markets
Even though the national picture median price picture is positive overall, a closer look at the data reveals a few nuanced twists for particular aspects of the solar industry. For instance, national median installed prices of $4.3/watt on residential, $3.9/watt for non-residential systems below 500 kW, and $2.8/watt for non-residential systems over 500 kW in size are relatively high compared to recent low-price benchmarks ranging between $2.8-$4.5/watt for residential and $1.7-$4.1/watt for non-residential systems.
Installed prices vary even more when comparing individual state markets. For example, median installed prices for residential systems range from a low of $3.4/watt in Delaware and Texas to a high of $4.8/watt in New York State. Additionally, three of the largest state markets by installed capacity – California, Massachusetts, and New York – exhibit higher prices, pulling the national median price upward even though pricing in most states falls below the aggregate national media price.
This trend is also evident between different residential installers working within the same state. In Arizona, California, Massachusetts, and New Jersey, installer-level median prices vary widely between the upper and lower 20th percentiles. Interestingly, while LBNL does not see a connection between high-volume installers and lower-priced systems, it does note economies of scale occur among all solar systems with systems becoming cheaper per watt as they get larger in size.
Finally, installed prices for both residential and non-residential systems below 500kW in several other key international solar markets like Germany and China remain much lower than in America. However, LBNL attributes this spread to soft cost differences, suggesting our domestic industry can wring even more efficiencies from projects.
Can Solar Reach Every American Community?
Add it all up, and not only does the reason for solar’s surge become clear, but so does its potential to reach all Americans – it simply costs less and less every year for homeowners and businesses to generate their own clean electricity.
“Low-income communities and communities of color look to community-owned and distributed renewable energy as a pathway to build a more resilient economy and society,” said Anthony Giancatarino of the Center for Social Inclusion. “For many of these communities, a key barrier has long been the issue of affordability. Tracking the Sun shows the decreasing cost of solar is making this pathway possible not only for low-income and people of color, but for all of us.”
Drive an electric car? Complete one of our short surveys for our next electric car report.
Keep up to date with all the hottest cleantech news by subscribing to our (free) cleantech newsletter, or keep an eye on sector-specific news by getting our (also free) solar energy newsletter, electric vehicle newsletter, or wind energy newsletter.